What comes after liquidation

Public Services Repository


Does the company cease operations immediately?

[1] A company can enter into liquidation procedure in two manners, by

  • voluntary liquidation and
    • members’ voluntary winding up (Section 432(2)(a) of the Companies Act 2016);
  • compulsory liquidation (Section 464 of the Companies Act 2016).

[2] In each circumstance, a liquidator will be appointed to carry out the winding up progress. The appointed liquidator will straight away take over the administration of the company (Leopad Holdings Sdn Bhd v Asian Shield Warehousing Sdn Bhd and another appeal [2019] MLJU 1720) and the director who used to conduct the company’s business immediately cease to have any management power over the company. The purpose of switching the personal in-charge is to put the company in different person’s hand so that the liquidation is carried out fairly to the company’s stakeholders.


[3] According to Malaysian Department of Insolvency official portal, the duties of a liquidator are as follow:

–      To investigate into the affairs and assets of the company
–      To investigate the conduct of its directors and other related persons
–      To investigate claims made by of creditors and third parties
–      To collect and realize the company’s assets at the best possible price and in a manner that is to the best advantage of the company


[4] From the above information, we know that the liquidator’s aims are not to manage the company and there is no obligation on them to direct the company to carry out business activities even if it is obviously profitable.

[5] Also, from the Malaysian Department of Insolvency official portal, the effects of winding up on a company are as follow:

–      Cessation of company’s business
–      Termination of contracts of employment
–      Avoidance of disposition of company’s assets
–      Avoidance of transfer of shares
–      Avoidance of uncompleted execution

[6] Liquidator plays an important role when the company is wound up. There is no a single codified document tells what they must do step by step, as they have discretionary power on what to do to a company. However, they are still being bound by some rules and like the director of company, if they breach their duties, they can be litigated.

[7] Here are what a liquidator will usually do when he/she is appointed:

  1. write to the director to notify of his appointment and ask for liquidator’s security he/she deems appropriate.
  2. Submit the security which was obtained from the director in the form of a bankers’ guarantee.
  3. Study the status of the company either by way of searching from the Registry of Companies or of seeking assistance from solicitors who had taken actions against the company.
  4. Ask for the company’s bank account(s) from the bank
  5. Request the directors to hand over the company’s assets which are in their possession
  6. Visits the company’s premises, request the employees to leave and paste copies of the winding-up order at prominent places around the premises. Engage a security company to look after the premises if necessary.
  7. Stops all the business activities and terminate employees’ services and other contracts
  8. Engage a firm of valuers to do valuation of the assets and engage auctioneer to sell the properties.
  9. Investigate the affairs of company, including the reason of liquidation.
  10. Call the first meeting of creditors and shareholders to form the Committee of Inspection who will then represent all the creditors and shareholders
  11. Serve notice to creditors mentioning about the amount of payment they will get. Realize all the assets of company and distributed the money according to the rules of priority of claims on insolvency (RE PERDANA MERCHANT BANKERS BHD [1997] 3 MLJ 435)

secured creditors (fixed charges) > liquidator’s costs > employees’ salaries, pension contribution >

secured creditors (floating charges) > unsecured creditors > shareholders

  1. Apply to the court to resign from the company
  2. Company dissolution, end of winding-up process

[8] From the provisions of Companies Act 1965, for voluntary liquidation cases, the company’s business can be carried on after the winding-up order has been granted if the liquidators feel that it is necessary for the beneficial winding up and that the creditors are not prejudiced (Dato’ Prem Krishna Sahgal v Muniandy a/l Nadasan & Ors [2018] 2 MLJ 693); for compulsory liquidation cases, the liquidators can with the authority either of the Court or of the committee of inspection conduct the company’s business as long as is necessary for beneficial winding up.

[9] However, the 1965 Act has been amended by Companies Act 2016 (CA 2016). The liquidators’ power is now limited to act and execute deeds, receipts and other documents on behalf of the company’s name (Schedule 12 Part1 CA 2016, Merais Sdn Bhd v Lai King Lung Holdings SDN BHD & Anor [2019] 5 MLJ 801) . If they intend to carry on the business of the company, they need to obtain approval from related authority (Schedule 12 Part 2 CA 2016), the approval of special resolution of company for member’s voluntary liquidation; the approval of court or committee of inspection for creditor’s voluntary liquidation and compulsory liquidation. Nevertheless, all business activities are to be stopped during the 108 days of the winding up order, this provision applies to all kinds of liquidation.

[10] In summary, once a company enters into liquidation, a liquidator will be engaged to deal with the procedures of winding-up, namely to take over the company, conduct investment, realize company’s assets and to pay off the debts. In relation to the company’s on-going business activities, liquidators will end them immediately unless they feel that it is necessary to carry on for a beneficial winding up of the company, while under Companies Act 2016, a court’s permission or committee of inspection’s permission is required for them to do so.

Ting Bee Ren
University of Leeds

Ting Bee Ren

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