Procedures for voluntary winding up.

Member’s voluntary winding up

 
Two circumstances (S 254)
i. When it is provided in Memorandum and Article of Association (M&A) of the company - S 254 (1) (a)
ii. Through special resolution – S 254 (1) (b)
 
1. During meeting of directors – made a written declaration (Declaration of Solvency - DOS) (S 257 (1))
The DOS shall contain:
- inquiry into the affairs of the company
- opinion form the director that the company will be able to pay its debts in full within a period not exceeding 12 months after commencement of W/U

Requirement for the DOS (S 257 (3)):
- made at the meetings of directors
- made within 5 weeks – preceding the passing of the resolution
- lodge with Registrar of Company – before the date which the notice of meeting for the resolution of W/U to be sent out – Lodge through F 66 of Companies Regulation 1966.

2. Notice for General Meeting to pass resolution – made by directors (S 145)

3. General Meeting - Pass resolution
- appoint the liquidator (S 258 (1))

4. Company shall then:
- lodge with the Registrar of Company the Notice of Resolution (F 11 of Companies Regulation 1966) – within 7 days after passing the resolution (S 254 (2)(a))
- give notice of the resolution in newspaper – within 10 days after passing the resolution (S 254 (2)(b))
ð Where a provisional liquidator is appointed before the passing of a special resolution, the W/U commences at the time when Form 65A is lodged with the ROC
ð For voluntary W/U the liquidator does not need to be an approved liquidator – a director/other officer of the comp may also be an appointed liquidator [S 10 (2)]
o However in CVWU, this is subject to the approval by a simple majority of creditors meeting

Creditor’s voluntary winding up
a. If company is insolvent/Directors did not make & lodge a declaration of solvency
Director – in addition for calling for members meeting – convene a meeting of creditors
- lay statement before them the company financial position (S 260(1))
b. If director lodged Declaration of Solvency
i. Liquidator appointed à Liquidator’s opinion – company unable to clear its debt within 12 months
ii. Liquidator must convene a meeting of creditors [S 259 CA]

S 176 of the Companies Act
- Provision enable the rights & liabilities of members and creditors of a company to be reorganized by a scheme of compromise or arrangement - the scheme once approved, will binds the company, members and creditors

- Several types of schemes of arrangement:
i. Arrangement between a company and its creditors – proposed when a company is in financial difficulties
- alternative to drastic step of winding up the company
- during the moratorium, the comp affairs are run by a scheme administrator or manager appointed by the creditors – scheme administrator is usually given extremely broad powers – often include the ability to sell the comp business & in some cases, sell members shares.
ii. Compromise scheme – creditors agree to accept payment of less than amounts they are owed in full satisfaction of their debts

- Procedure:
i. Comp, Member, Creditor or liquidator (if the comp is being wound up), may apply to the court for an order that a meeting of members or creditors or classes of members or creditors be convened so as to initiate a proposed schemes.

- in considering whether the meeting should be ordered to be held, the court will consider the terms of the proposal of the scheme of arrangement to be viable, feasible, workable or intelligible. Twenty First Century Oils Sdn Bhd v Bank of Commerce (M) Bhd & Ors (No. 2) [1993] 2 MLJ 353
Re Kuala Lumpur Industries Bhd [1990] 2 MLJ 180
-> S 176 (1), O 88 R 2 ROC 2012
a. OS order to convene meeting: Form 129 Atkins Court Forms (pg: 1225)
b. Affidavit in Support: Form 130 Atkins Court Forms (pg: 1301)
c. Notice of meeting of creditors: Form 131 Atkins Court Forms (pg: 1308)

ii. Scheme is binding only if it is approved by both the required majority (3/4 in value) of creditors or members and by the court [S 176(3)]
a. Petition for sanction: Form 683 Atkins Court Forms (pg: 2554)
b. Affidavit in Support: Form 684 Atkins Court Forms (pg: 2558)

iii. Scheme will only come into effect when the copy of the court order approving it is lodged with the Registrar. [S 176(5)]
a. Court Order: Form 691 Atkins Court Forms (pg: 2707)
- S 176 (10) also gives power to the court to restrain proceedings – period not more than 90 days
- S 176 (10A) provide for requirement that the court will look upon granting the restraining order.
- S 176 (10B) person approved/appointed by the court to act as a director of the company under S 176(10A) – have the right of access at all reasonable times to the accounting and other records of the company – entitle to require from any officer of the company such info. & explanation – he/she may require for the purpose of their duty.
- S 176 (10C) & (10D) – any disposal/acquiring of property of the company – other than made in ordinary course of business – made after the grant of the restraining order by the Court – shall be void.
- Where an order is made under S 176 (10), every company in relation to which the order is made shall, within seven days – lodge the copy of the order to Registrar – publish a notice of the order in a daily newspaper