Winding up slides 2016_MrLimCheeWee

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"A4rb_standard_band_photo" – 20100701 – do not delete this text object 1 Winding Up Malaysian Law Firm of the Year 2008 - 2011 2013 - 2016 Who’s Who Legal Awards

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"A4rb_standard_band_photo" – 20100701 – do not delete this text object 2 Winding Up 1. Compulsory Winding Up. 2. Changes to the Liquidator’s Powers. 3. Priorities. 4. Impact on Secured Creditors 5. Striking Off the Register Summary Malaysian Law Firm of the Year 2008 - 2011 2013 - 2016 Who’s Who Legal Awards

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"A4rb_standard_band_photo" – 20100701 – do not delete this text object 3 Compulsory Winding Up – Grounds • New cl 4651l – where a declaration is made by the Minister pursuant to s 590 public interests investigation on a company / foreign company. • Registrar’s finding under cl 4651k that a company is being used for unlawful purposes prejudicial to security public order etc. shall constitute prima facie evidence until proven otherwise. cl 4652 Malaysian Law Firm of the Year 2008 - 2011 2013 - 2016 Who’s Who Legal Awards

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"A4rb_standard_band_photo" – 20100701 – do not delete this text object 4 Compulsory Winding Up 1. Inability to pay debts now comes under cl. 466. 2. “466 Notice” – statutory demand increased to a sum to be prescribed by the Minister likely to be RM5000 for now an increase from the present RM500 3. Petition shall be filed in Court within 6 months from expiry of the “466 Notice”. Malaysian Law Firm of the Year 2008 - 2011 2013 - 2016 Who’s Who Legal Awards

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"A4rb_standard_band_photo" – 20100701 – do not delete this text object 5 An LOD could potentially be a statutory demand Lai Yak Kee v Pembinaan Alam Cemerlang Sdn Bhd 2012 1 LNS 1464 FC held in respect of 218 notice: • no prescribed form required for statutory demand • a demand issued under the creditor’s hand for a sum above the statutory threshold and served on the registered address of the debtor company is sufficient • need not stipulate any warning of an impending winding up petition Malaysian Law Firm of the Year 2008 - 2011 2013 - 2016 Who’s Who Legal Awards

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"A4rb_standard_band_photo" – 20100701 – do not delete this text object 6 More lenient time limit for filing affidavits in petitions on unfair conduct / just and equitable grounds Kilo Asset Sdn Bhd v Hew Tai Hong 2016 1 MLJ 785 FC • While the word “shall” in rule 302 Companies Winding-Up Rules 1972 requiring Petitioner’s affidavit in reply to be filed and served within 3 days of the affidavit in opposition is mandatory in expression rule 302 must be read harmoniously with other provisions in the 1972 Rules and Companies Act 1965 which give the Court the discretion to abridge time to cure technical non-compliance. • Court not rigid because in a just and equitable petition involving shareholders’ disputes the facts are often hotly contested. Malaysian Law Firm of the Year 2008 - 2011 2013 - 2016 Who’s Who Legal Awards

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"A4rb_standard_band_photo" – 20100701 – do not delete this text object 7 Void Disposition • Any disposition of property attachment etc. after presentation of winding up petition is still void unless court otherwise orders cl.472 • Save for “exempt disposition” i.e. disposition made by interim liquidator or liquidator. Malaysian Law Firm of the Year 2008 - 2011 2013 - 2016 Who’s Who Legal Awards

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"A4rb_standard_band_photo" – 20100701 – do not delete this text object 8 Changes to the Liquidator’s Powers • Bill: List of Liquidator’s powers in Eleventh Schedule similar to present s.236. • Major change: Ability to continue to carry on business. • Presently: Liquidator can carry on business of company for 4 weeks after winding up Order after which require Court or COI approval. s.2361a • Liquidator can now carry on business for 180 days 6 months after winding up Order after which must obtain Court or COI approval. Malaysian Law Firm of the Year 2008 - 2011 2013 - 2016 Who’s Who Legal Awards

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"A4rb_standard_band_photo" – 20100701 – do not delete this text object 9 Changes to the Liquidator’s Powers • The other s.2362 powers where there is no need for Court or COI approval are maintained. • Changes: there is no need for authority to: 1. Compromise any debt due to the company which is less than RM10000.00 change from RM1500.00. 2. “appoint an advocate to assist him in his duties.” Malaysian Law Firm of the Year 2008 - 2011 2013 - 2016 Who’s Who Legal Awards

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"A4rb_standard_band_photo" – 20100701 – do not delete this text object 10 Priorities • List of priorities now at cl. 527. • Cl. 5271b for wages or salary equivalent to s.2921b: Amount increased to RM15000 instead of present RM1500. Malaysian Law Firm of the Year 2008 - 2011 2013 - 2016 Who’s Who Legal Awards

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"A4rb_standard_band_photo" – 20100701 – do not delete this text object 11 Courts are mindful of commercial reality when assessing liquidators’ duties Ooi Woon Chee Anor v Dato See Teow Chuan Ors 2012 2 MLJ 713 FC • No conflict of interest between a liquidator and the company just because the liquidator’s firm had previously provided auditing or other services to the company. • Liquidators do not act in a judicial capacity in selling assets – nothing wrong to hold meetings with bidders outside of office. Liquidators are obliged to enter the market and use all powers to get the best price. Malaysian Law Firm of the Year 2008 - 2011 2013 - 2016 Who’s Who Legal Awards

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"A4rb_standard_band_photo" – 20100701 – do not delete this text object 12 Court approval not required to pay solicitors engaged to bring / defend action in liquidation Wong Sin Fan 2 Ors v Ng Peak Yam Ng Peak Yeow Anor 2013 2 MLJ 629 FC • rule 173 of the WU Rules does not make it mandatory for all bills be assessed and approved by the High Court taxing officer before a liquidator can pay. • Where the services required by the liquidator are those outside his ordinary administrative and management duties he only has the discretion but no duty to have such charges taxed. • Court is slow to interfere with any act or decision of the liquidators unless manifestly unreasonable and absurd. Malaysian Law Firm of the Year 2008 - 2011 2013 - 2016 Who’s Who Legal Awards

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"A4rb_standard_band_photo" – 20100701 – do not delete this text object 13 But… claim for unreasonable fees/costs will be disallowed Dato Robert Teo Keng Tuan v Metroplex Bhd 2014 1 MLJ 39 FC • Where rule 173 applies liquidators have to put sufficient information before the Court to show that the costs claimed are reasonable or justified. • The issue of reasonableness of costs is purely a matter of discretion for the High Court. • Held: in this case the provisional liquidator should not have appointed a foreign valuer to prepare report when a local valuation firm could have done so. Malaysian Law Firm of the Year 2008 - 2011 2013 - 2016 Who’s Who Legal Awards

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"A4rb_standard_band_photo" – 20100701 – do not delete this text object 14 Effect of a stay of winding up American International Assurance Bhd v Coordinated Services L Design Sdn Bhd 2012 1 MLJ 369 CA • A stay takes effect only from the date of the pronouncement of the stay and does not wipe out the winding up order. • The stay operates only to halt the proceedings and thenceforth to permit the officers of the company to continue in control. • It cannot validate all dealings and agreements entered into after the date of the winding up until the date of the stay order. Malaysian Law Firm of the Year 2008 - 2011 2013 - 2016 Who’s Who Legal Awards

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"A4rb_standard_band_photo" – 20100701 – do not delete this text object 15 No time bar for a lien holder’s caveat over the land of wound up company Koh Huat Kwan v Pegawai Penerima selaku pelikuidasi bagi Poh Mah Housing Development Sdn Bhd Ors 2015 5 MLJ 323 CA • Commencement of liquidation stops time running in favour of creditors. Limitation does not apply to disposal of assets by liquidators. • The subsequent offer of a higher bid should not be a ground for setting aside the sale in circumstances where the price is adequate. Malaysian Law Firm of the Year 2008 - 2011 2013 - 2016 Who’s Who Legal Awards

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"A4rb_standard_band_photo" – 20100701 – do not delete this text object 16 Undue Preference • Standalone undue preference provision: cl. 528. • 6-month period before the presentation of the winding up petition and where company wound up. • Change: statutory exception to undue preference i valuable consideration ii without any actual notice of the contravention cl. 5284 5 6 • Change: the void/voidable settlement under the law of bankruptcy no longer imported into cl. 5281. Malaysian Law Firm of the Year 2008 - 2011 2013 - 2016 Who’s Who Legal Awards

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"A4rb_standard_band_photo" – 20100701 – do not delete this text object 17 Potential Impact on Secured Creditors Malaysian Law Firm of the Year 2008 - 2011 2013 - 2016 Who’s Who Legal Awards

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"A4rb_standard_band_photo" – 20100701 – do not delete this text object 18 Potential Impact on Secured Creditors • New provision spelling out rights and duties of secured creditors in winding up: cl. 524. Option 1: Realise property subject to charge. Option 2: Value the charged property and claim for the balance as an unsecured creditor. Option 3: Surrender the charged property and claim for whole amount as unsecured creditor. Malaysian Law Firm of the Year 2008 - 2011 2013 - 2016 Who’s Who Legal Awards

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"A4rb_standard_band_photo" – 20100701 – do not delete this text object 19 Potential Impact on Secured Creditors • Uncertainty on Option 1 – realising charged property: cl. 5243b. • Shall account to the liquidator for any surplus remaining after satisfaction of the debt. But there is reference that interest cannot exceed 6 months in respect of that debt up to the time of its satisfaction. • Does this mean the secured creditor cannot capitalise the interest can only claim for 6 months interest the moment there is an outstanding amount Malaysian Law Firm of the Year 2008 - 2011 2013 - 2016 Who’s Who Legal Awards

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"A4rb_standard_band_photo" – 20100701 – do not delete this text object 20 Potential Impact on Secured Creditors • Act quickly. Decide on Options 1 2 and 3. • Liquidator can serve notice on the secured creditor giving 21 days to elect which option to take up and to exercise that power. • If fail to act then treated as having surrendered the charged property i.e. treated as having elected for Option 3. Malaysian Law Firm of the Year 2008 - 2011 2013 - 2016 Who’s Who Legal Awards

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"A4rb_standard_band_photo" – 20100701 – do not delete this text object 21 Striking Off • The Registrar may strike a company off the register if it fails to lodge an AR for 3 or more consecutive years: Cl. 688 • Powers of Registrar to strike off now at Cl. 549 • New grounds – company has contravened the Act – company being used for unlawful purposes or any purpose prejudicial to or incompatible with peace welfare security public interest public order good order or morality in Malaysia. • Registrar acting on his own motion or upon an application by a director member or liquidator: Cl. 550 Malaysian Law Firm of the Year 2008 - 2011 2013 - 2016 Who’s Who Legal Awards

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"A4rb_standard_band_photo" – 20100701 – do not delete this text object 22 Striking Off – Procedural safeguards • Like the present s 308 Cl. 551 provides for issuance by Registrar of notice of intention to strike off • 30 days later publication in the Gazette that company has been dissolved if Registrar receives no response/objection or is not satisfied with the reasons why company should not be struck off: Cl. 5512 • New: raise objections to striking off with Registrar • Must do so within 30 days from date of notice Malaysian Law Firm of the Year 2008 - 2011 2013 - 2016 Who’s Who Legal Awards

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"A4rb_standard_band_photo" – 20100701 – do not delete this text object 23 Striking Off – grounds of objection a Still carrying on business or other reason to continue in existence b Company is a party to legal proceedings c In receivership or liquidation or both d Objector is a creditor or a person with an undischarged claim against company e Intending to pursue derivative action on behalf of company f It would not be just and equitable to de-register company Malaysian Law Firm of the Year 2008 - 2011 2013 - 2016 Who’s Who Legal Awards

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"A4rb_standard_band_photo" – 20100701 – do not delete this text object 24 Striking Off – grounds of objection Cl. 5522 sets out what is not an undischarged claim: - If claim has been paid in full or in part by a receiver or liquidator - If the receiver or liquidator has notified the creditor of insufficient assets - If payment has been made to shareholder in the case of surplus assets - If the receiver or liquidator has notified the member or person that there is no surplus asset Malaysian Law Firm of the Year 2008 - 2011 2013 - 2016 Who’s Who Legal Awards

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"A4rb_standard_band_photo" – 20100701 – do not delete this text object 25 Striking Off • Striking off shall not affect directors’ or members’ liabilities nor the Court’s winding up powers: Cl.554 • Cl. 5551 any person aggrieved by the striking off decision may seek reinstatement from Court • Timeframe to do so within 7 years changed from the present 15 years Malaysian Law Firm of the Year 2008 - 2011 2013 - 2016 Who’s Who Legal Awards

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