Winding up a company – also known as going into liquidation – is longer and more complex than simply striking off a company. So at first glance, it can look less appealing than a strike-off when deciding on how to close down your business.
However, in some circumstances, winding up a company may be more appropriate for your business.
For example, your shareholders might want to benefit from the proceeds gained by the company after selling off the assets. But – as we mentioned in the previous section – if your shareholders receive any capital from the company, the company won’t be eligible to apply for strike-off.
In this case, a company wind-up might be your best option for closure of business.
Generally, the voluntary options for winding up a company in Malaysia are either:
- a members’ voluntary liquidation (“MVL”); or
- a creditors’ voluntary liquidation (“CVL”).
While you need to appoint a liquidator for both options, in an MVL (where the company must be financially solvent), the surplus of the company will distribute to members upon the settlement of the debts and expenses. By contrast, in a CVL (where the company is not financially solvent), the proceeds realised from selling off the assets will be paid to the creditors.
To start an MVL:
- the company must be solvent; and
- the Board of Directors must adopt a Declaration of Solvency and form an opinion that the company can settle all debts within twelve (12) months from the commencement date of liquidation.
After adopting this Declaration, you will need to convene a members’ meeting, which has two important functions:
- to seek shareholder approval to voluntarily liquidate the company; and
- to appoint the liquidator.
At this point, you will need to open a bank account specifically for the liquidation process.
From here, the liquidator will notify all relevant parties that the MVL process has started. These parties include the:
- Company Secretary;
- tax agents;
- Employees’ Provident Fund (“EPF”);
- Inland Revenue Board (“IRB”);
- Social Security Organisation (“SOCSO”);
- Royal Customs of Malaysia (“RCM”); and
- Human Resource Development Fund Malaysia (“HRDF”)
Then, during the liquidation process, the liquidator must prepare and submit “Liquidator’s accounts” to the CCM and the Official Receiver every six (6) months.
If the liquidation process takes more than a year, an annual meeting of members will be held to report on the winding-up processes undertaken to date. An MVL typically takes between 1-2 years to complete, depending on how long it takes to obtain tax clearance from the IRB.
However, after receiving tax clearance, the liquidator shall prepare the final account and convene a final meeting to finalise the liquidation process and close down your business.
If you believe an MVL is the right option for your company, save time and skip the complexity by using our professional liquidation services. Our company secretarial services in Malaysia will help you to dissolve your company in a quick and effective manner.