Company's Winding Up: Functions of a Liquidator (1)

When a company is being wound up, either voluntarily or by a Court order, a person or an entity will be appointed to liquidate the company. The appointed liquidator will take control of winding up the affairs of the company, liquidate its assets and distribute the proceeds to its creditors.

The powers of the directors cease upon the appointment of the liquidator.

A person cannot (unless with the leave of Court) be appointed as an interim liquidator or liquidator of a company if:

1. He is not an approved liquidator;
2. He is indebted to the company in an amount exceeding RM25,000;
3. He is an officer of the company;
4. He is a partner, employer or employee of a company's officer;
5. He has made arrangement with or for the benefit of his creditors under any law relating to bankruptcy; or
6. He is convicted of an offence involving fraud or dishonesty.

Voluntary Winding Up

Acts of a liquidator is valid regardless of any defects to his appointment or qualification discovered afterwards. Any conveyance, assignment, transfer, mortgage, charge or disposition of a company's property made by a liquidator in favour of a bona fide third party purchaser for value without notice shall be valid, notwithstanding ay defect or irregularity in the winding up process or the appointment of the liquidator.

General powers and duties

The liquidator may exercise any power and duty specified in the Eleventh Schedule of CA 2006, including:

1. In the case of members' voluntary winding up, with the approval of special resolution of the company, exercise any of the powers in the Twelfth Schedule below;
2. In the case of creditors' voluntary winding up, with the approval of the Court or the committee of inspection, exercise any of the powers in the Twelfth Schedule below;
3. Exercise any of the other powers given to the liquidator in compulsory winding up;
4. Exercise the power to settle a list of contributories;
5. Exercise the power of making calls or summon general meetings to obtain sanction of the company by special resolution in any matter or for any purpose as the liquidator thinks fit; and
6. Pay debts of the company and adjust the rights of the contributories.

Power of liquidator to accept shares, etc., as consideration for sale of company's property

In the case of members' voluntary winding up, where the whole or part of the business is to be transferred or sold to another corporation, the liquidator may make a decision binding on the members of the company to:

1. receive in compensation the shares, debentures, policies or other interests in the corporation to be distributed among the company members; or
2. enter into any other arrangement (ie. for the members of the company to participate in the profits of or receive other benefit from the corporation).

In the case of a creditors' voluntary winding up, these powers may only be exercised with the approval of the Court or the committee of inspection.

Meetings of members and creditors and dissolution

If the winding up process takes more than a year, the liquidator shall, at the end of the first year from the commencement of winding up and of each succeeding year or not more than 3 months after the succeeding year, summon:

1. a meeting of members of the company, in the case of members' voluntary winding up; and
2. a meeting of the members of the company and a creditors' meeting, in the case of creditors' voluntary winding up.

At the meeting, the liquidator shall lay an account of the acts of the liquidator and dealings and conduct of the winding up for the entire year.

As soon as the affairs of the company are fully wound up, the liquidator shall prepare an account showing how the winding up has been conducted and how the property of the company has been disposed of.

A meeting of the members of the company (or the members and the creditors of the company, as the case may be) shall be called for the purpose of laying out this account.

The liquidator shall lodge the return of the meeting with the Registrar and the Official Receiver, and on the expiration of 3 months after the lodging of the return, the company shall be dissolved.