Reconstruction

Receivership
Winding Up
Strike of

Receivership

Compromise
Sec 176

A company goes into

receivership when receiver
is appointed by the
debenture holder (or
trustee) under a power
contained in debenture or
trust deed, or
Court
will A receivership can be
terminated
or
the
receivership becomes a
liquidation

Striking off
Sec 308

Winding up
Sec 254

an arrangement in
which parties of
conflicting interests
agree to
accommodate each
side by adjustment
or modification of
their interests

deregisters the co by
striking the cos name off
the register of companies
as a defunct co under
s308

a legal process which the

affairs of the co to an end, co
being dissolved and its
property administered for the
benefits of its creditors and
members

Business
proceed

Termination of company

Termination of company

Lower cost

Higher cost of liquidation

No/low cost
Discussion and
negotiation with the
creditors

Directors are still in

power

A receivers task is to take

possession of assets
covered under the charge,
to safeguard them and to
receive the income from
them for the benefit of
secured debenture holder.
The director will remain in
the office but their power
to deal with assets of co in
charge cease

Application to CCM
for striking off
Procedure taken by
CCM under section
308

Directors
power

are

still

Voluntary winding up
by the members or by
the creditors; or
Compulsory winding up
by order of the Court

in the power of directors shall

cease

Corporate Restructuring

Any changes in capital structure, in

ownership or in operation, which is
outside the ordinary course of business.

May be done through a compromise or

arrangement with debenture holder, creditor
and shareholders with variation, adjustment or
modification of their rights; or

Restucturing

DEFINITION Compromise and

arrangement

Is an arrangement in which parties of

conflicting interests agree to accommodate
each side by adjustment or modification of
their interests.

Restucturing

Definition -Reconstruction

Is a rearranging of a companys structure which

may involve transfer of assets of one co to a
new co or an alteration to the capital structure
of the co with the same persons as s/holders

Restucturing

Compromise & arrangement (C&A)

-Section 176
C&A can be proposed to the creditors when a
co is heavily in debt but its business is viable.
The court will given power by the Act to give
effect to the scheme of compromise
/arrangement even though consent of every
person intended to be bound by the scheme is
not obtained as long as a majority of three
fourth in value of the creditors or members
agree who present and vote(s176)

Restucturing

Examples of scheme involving C&A

with creditors:
Creditors and debenture holders giving an
extension of time for payment
Debenture holders having the rights
attached to their debentures varied in
some other respect
Debenture holders accepting a cash
payment less than the face value of their
debentures
Creditors and debenture holders accepting
shares in the co or in a new co in discharge
of their debts

Restucturing

Examples of scheme involving C&A

with creditors
Secured creditors giving up their securities in
whole or in part
Debenture holders agreeing to forgo their
interest for a stated period

Restucturing

Examples of scheme involving C&A

with members:

Preference s/holders agreeing to cancellation of

arrears of dividends
Preference s/holders agreeing to a reduction in
the fixed rate of dividend in the future or have
their rights varied
Ordinary s/h agreeing to surrender part of their
holdings to preference s/h in return of the
preference s/h agreeing to accept ordinary shares
in lieu of arrears of dividend or
Reorganization of the share capital of a company
by consolidation and/or division of different
classes of shares.
Restucturing

Procedures

The directors would appoint corporate,

financial and legal advisers
Preparing the necessary draft scheme with
the assistance of the financial and legal
experts
Attitudes of the various parties concerned
should be tested (creditors, members) by
inviting them to separate meetings
The final form of the proposed compromise
or arrangement settled by directors
For listed company, they must make an
immediate announcement to the Bursa
Malaysia of the proposed scheme

Restucturing

10

Procedures
An explanatory statement and any other
relevant documents according to the
requirement of the proposed scheme shall
then be prepared
An application to the Court for an order to
convene meeting
The court may order the holding of the
scheme meeting in such manner as the court
directs
The secretary will send the various
documents and explanatory statement with
the notice of the meeting

Restucturing

11

Procedures
The meeting held as directed by Court.
Such meeting may be adjourned if agreed by a majority
in value of the creditors/members present and vote.
If the scheme has been approved, the court may
by a court order grant its approval to the scheme
subjects to such alterations. Once approved, all
the parties concerned are bound by the terms of
the C&A
The order given shall have no effect until it is lodged with
CCM and it shall take effect as may be specified in the
order.
A copy of the order must be annexed to every copy of the
M&A or the court may exempt such compliance or direct
it for such period as it thinks fit

Restucturing

12

Restraining Order (RO) under

CA 1965, s176(10)

RO - To restrain further proceedings in any

action or proceeding against any person
The court may grant RO on application of co or
any member or creditor

Restucturing

13

Restraining Order (RO) under

CA 1965

The court may grant RO to a co for a period of not

more than 90 days (or longer period as the court may
allow) if
It is satisfied that there is a proposal for a scheme
of C&A representing at least one-half in value of all
creditors
The RO is necessary to enable the co formalise the
scheme for approval of creditors
A statement as to affair of co is lodged with
application
It approves the person nominated by a majority of
creditors in the application for RO to act as
directors
7 days after granting RO by court, co must lodge
copy of order to CCM and publish a notice in
newspapers.
Restucturing

14

RECEIVERSHIP

RECEIVERSHIP

A company goes into receivership when

receiver is appointed by
the debenture holder (or trustee) under a power
contained in debenture or trust deed, or
Court

The appointment is normally made in the

event of a breach by the co of the conditions
attached to the debentures.

RECEIVER - qualification

A receiver of the property of a co must not

be the following:

A corporation;
An undischarged bankrupt;
A mortgagee of any property of the co;
An auditor or an officer of the mortgagee; or
Any person who is not an approved Official
Receiver (sec 182(1) CA)

Procedure on appointment
Appointor must within 7 days after
appointment, lodge Form 59 to CCM as
notice. [s186(1)]
Receiver appointed must immediately send
notice of his appointment to co.[s188(1)(a)]
Within 14 days after receive notice, the co
shall prepare and deliver to the receiver a
Statement of Affairs (Form 62) [s188(1)
(b) and s189]

Procedure on appointment
Co must add to all documents on which cos
name appears a statement that a receiver
has been appointed [s187]
Within 1 month after receipt of Form 61 &
62, receiver shall lodge to CCM a copy of
statement
For receiver appointed by debenture holders,
send to the trustee a copy of the statement

Remuneration of Receiver
Receiver appointed by debenture holders, it
is fixed by agreement
Receiver appointed by Court will have his
remuneration fixed by the Court.

Duty of Receiver and Receiver

and Manager

A receivers task is to take possession of assets

covered under the charge, to safeguard them and to
receive the income from them for the benefit of
secured debenture holder.
A receiver can only dispose of the asset charged, pay
off the debts due to the secured creditors.
He may be also appointed as a receiver and
manager to empower him to continue managing the
business as a going concern until the secured debt is
discharged.

Power of receiver appointed

by Debenture Holders
A receiver is an agent of the debenture holders
thus the debenture holders are liable on
contracts entered by the receiver, unless the
term of issue provide otherwise. Debenture may
also provide that receiver as agent of co.
Power in collection and realization of assets.
He can only carry on the cos business if he is
expressly empowered to do so by the terms of
the debentures or the trust deed (appointed as
receiver and manager).

Power of receiver appointed

by Debenture Holders

From the proceeds he obtains from carrying on

the business and realising the assets, he will

Pay the expenses of the business, interest on prior

charges, preferential debts and his own remuneration
Pay to the debenture holders what is due to them by
way of principal and /interest.

Receiver is entitled to indemnity out of the

cos assets and has priority over the debenture
holders

Power of receiver appointed

by Court

A receiver may be appointed by Court when:

The principal / interest is in arrears; or
The co is being wound up; or
The security is in jeopardy

upon application of the trustee for

debenture holder of a trust deed or on
application of borrower or SC under
provision of SCA 1993.

The receiver is independent officer of the

Court and personally liable on contracts
made by him.

Power of receiver appointed

by Court

Entitled to an indemnity out of the cos

assets and has priority over the debenture
holders
Will take possession of the assets, carry on
business, collect debts and act as owner of
the property charged.
May apply for directions (to Court) in
relation to the performance of his
functions.

RECEIVERSHIP
-effect on director

The director will remain in the office but

their power to deal with assets of co in
charge cease
The BOD can still exercise their power :

to convene a GM
for compliance with CA 1965 and still liable to
default of co with regard to compliance with filing
of returns to CCM.

Priority of payments during

receivership

After realising the cos assets and if the

proceed is insufficient, the payment must
in the following manner:

Cost & expenses of realization the assets

Cost & expenses of receivership, including
receivers remuneration
The costs and remuneration of the trustee for
the debenture holders.
Plaintiffs cost in legal action
Claims of preferential creditors if the
debentures are secured by floating charges
Claims for principal/interest for deb/h

Account of receipt and payment

The receiver is required within a month

after the expiration of 6 months from the
date of his appointment and of every
subsequent period of six months to prepare
a detailed account of receipt and payment
on Form 63 and lodge the form to CCM
together with an affidavit verifying the
accounts.

Termination of receivership

A receivership can be terminated

Where some means have been worked out to
enable the creditor concerned to be satisfied so
that the receiver can be withdrawn, or
The receivership becomes a liquidation

Termination of receivership

Where the receiver ceases to act, he must:

Within 7 days thereafter lodge with CCM notice to

that effect (Form 60)[s186(2)]
Within 1 month, lodge with CCM a detailed acc with
affidavit on Form 63 [s190]
Formally advise the co and surrender possession of
any property not realized.

Dissolution

A company can only be dissolved by legal

process. When a co collapses, its existence
can be terminated by adopting any of these
procedures:

Striking it off the register as a defunct co and

so dissolved without winding up [s308];
Dissolution as a result of winding up or
liquidation [Pt. X, s211-s318] ; or

Striking the co off the

register
A cos existence can be terminated when
CCM deregisters the co by striking the cos
name off the register of companies as a
defunct co under s308.
The effect of the deregistration - co would
be dissolved upon publication of the notice
of striking off by CCM
Deregistration normally chosen to avoid the
costs of liquidation.

Striking the co off the register

By:
Application to CCM for striking of
Procedure taken by CCM under section 308

Application to CCM for

striking of
A co seeking application to CCM must
fulfill the following conditions:
Obtain consent from shareholder
Has no asset and liabilities at time of
application
Has no o/s charges in Registrar of
Charge
Has no o/s penalties or ofer of
compounds under CA1965
Has no o/s tax or other liab with any
gment agencies

The information of co with the registrar is

up to date
Not involved in any legal proceeding within
or outside Malaysia
Has not made any return of capital to sh
Not a holding or a subsidiary of another
corporate body
Not a guarantor co

Application to CCM for striking

of

Procedures:

Settle all debt

Obtain shareholders consent pass a resolution to
authorise directors to make the application to CCM
for striking off
Board meeting/resolution pertaining to statutory
declaration set in section 308
Written application to CCM by cos directors,,s/h,
cs, accountant or lawyer requesting a striking off
(enclosing a statutory declaration, Form 11)- no fee
required.

If CCM satisfied with the statutory

declaration, may proceed to strike off the co.

Procedure taken by CCM under

section 308

Alternatively, deregistration could be

initiated by CCM in situations:

CCM finds out that a co has no officers to make

statutory returns; or
No record in CCMs office of the lodgment of AR
etc for 6 consecutive yrs;
A report showing that the co is no longer in
operation
The co can no longer be communicated at its
registered office or the directors are not
contactable.

Procedure taken by CCM

under section 308
CCM send letter of enquiry if he has
reason to believe that a co is not carrying
on business or not in operation.
Unless an answer stating that the co is
carrying on business or in operation is
received by CCM within 1 month, he may
publish in the Gazette and send to the co
a notice that at the expiration 3 months
from the date of notice, the name of co
will be struck off the register unless
cause is shown on the contrary, and the co
will be dissolved.

Procedure taken by CCM

under section 308
At the expiration of the 3 months period, the
CCM may strike the name of the co off the
register [s308(4)] unless the co file an
objection before expiration of 3 months.
The CCM shall then publish notice of the
striking off in the Gazette.
The co shall be dissolved on the publication
made in the Gazette.
But the striking off does not affect the
liability of every officer and member of co
[s308(1)(a)]

Procedure taken by CCM

under section 308
The striking off shall not affect the power
of Court to wind up a co whose name has been
struck off the register [s308(1)(b)]
After dissolution of co, any outstanding
property of the defunct co which was vested
in the co shall become vested in the CCM
together with all claims, rights and remedies
of the co [s310(1)]

Procedure taken by CCM

under section 308
CCM is authorized to sell or dispose of or
deal with the property and the moneys
received by CCM shall be applied in
defraying all costs, expenses, payment of
fees and commissions and any surplus shall
be dealt with as unclaimed moneys under
the Unclaimed Moneys Act 1965
CCM shall keep an account of all moneys and
properties vested in him [s313(1)]

WINDING UP (WU)

A WU or liquidation of a co is a legal process

which the affairs of the co to an end, co
being dissolved and its property administered
for the benefits of its creditors and
members.

WINDING UP

During WU, the assets are realized,

liabilities are paid out from the proceeds of
the realization and any surplus amount
thereafter are distributed to the members
in accordance with their rights and interests
in the co [s264 CA]

Types of Winding Up [s211]

Voluntary winding up by the members or by
the creditors; or
Compulsory winding up by order of the Court

Voluntary winding up

Circumstances in which a co may be wound

up [Sec 254 (1)]
When a period fixed for the duration of the co by
M&A, or occurrence of the event which the M&A
provide the co to be dissolved and has passed
ordinary resolution in GM
If the co so resolves by special resolution.

Voluntary winding up

May take 2 forms:

A members WU, if the co is solvent; or

A creditors WU, if the co is insolvent

Voluntary winding up
Members WU if directors are of the
opinion that it can pay debts in full within a
period of 12 months from the date of
commencement of WU by making statutory
declaration of solvency [s257].
If later found the co is unable to pay debts
in full, the WU becomes a Creditors WU
after the creditors at the creditors
meeting appoint some other person to be
liquidator to wind-up the co [s259(2-3)].

Declaration of solvency
Majority of director may make a written declaration that they
have made inquiry into affair of co. The declaration will be
together with amount of assets, and their expected realized value,
liabilities, and estimated expenses of WU.
The declaration must be made at a meeting of directors, within 5
weeks immediately preceding the passing of the resolution for
voluntary winding-up.
It must be lodged with CCM before the date on which the notices
of the meeting at which the resolution for the winding up the co
is to be proposed are sent out.

Compulsory winding up by
order of the Court

A co may be wound up under:

Special resolution of members; or

Special resolution resolved to that effect by the
co itself.

Done usually upon the initiation of a creditor

of the co so as to force the co to go into
liquidation on the ground that the co is
unable to pay its debts.
Once a winding up petition presented, it
cannot be withdrawn as only Court is
empowered to dismiss, adjourn or hear the
petition.

Court Winding Up

Petition by
Refer to sec 217

Circumstances inn which court may order

WU
Refer to sec 218

Procedures for winding up

General procedures for WU are similar although

the modes of WU may differ:
A special resolution is passed or Court makes an order
for the co to be wound up;
A liquidator is appointed by the members and/or
creditors or by Court to oversee the entire process of
liquidation; The cos assets and affairs generally pass
into the hands of the liquidator;
The liquidator converts the assets into cash, calls in
any uncalled capital and pays the creditors in order of
priority. Any surplus is distributed to the members of
the company; and
The company is dissolved.

Members voluntary winding

up
Members VWU shall commence at the time the
members of the co resolve to wind up and the
members shall be in control the WU process and
appoint a liquidator of their choice.
The affairs and conduct of co will be placed
under control of liquidator.
Once the special resolution is passed and
liquidator appointed, the CS will ceased his duty.
But CS may act as liquidator for members WU as
there is no requirement under CA that the
liquidator must be an approved liquidator for
WU

Creditors voluntary winding

up
Creditors WU can only take place where the
directors are unable to file a Declaration of
Solvency due to the fact that the co is insolvent.
In creditors WU, the management of the co is
shared by the members and the creditors but the
creditors have control as they appoint the
liquidator and decide on the composition of the
committee of inspection.

Procedure Members Voluntary

WU

BOD
Meeting

Form 66
Declaration of Solvency

Form 11(within 7 days)

Resolution for WU
EGM
Form 71 (within 14 days)
Notice of appointment of Liquidator
Liquidator will notify to auditor, solicitor,
banker, employees, suppliers, customer

CCM

Procedure Creditors Voluntary

WU

BOD
Meeting

Form 65A Statutory Declaration

Provisional Liquidator
CCM

EGM

Form 11(resolution)
(within 7 days)
Liquidator*

Creditors
meeting

Form 72A (Notice of appointment

(within 14 days)
Committee of Inspection

Procedure Court WU
Petition

By company, creditors,
contributories,
receiver, liquidator, minister, BN

Court
Order

Creditor
Meeting

EGM

To appoint liquidator
To appoint Com of Inspection

To appoint liquidator

Liquidator submit Form 70 (14 days from date of appointment)

CCM

At the end, liquidator applies court order for his release

Effects of winding up
the power of directors. In VWU, when the
liquidator appointed, the power of directors shall
cease where allowed by the liquidator/members
with the leave of liquidator. The directors power
shall cease when the Court orders the WU of the
co despite the lack of express statutory provision
to that effect.

Liquidators
A person appointed to carry out the WU of the cos
affairs and terminate its existence where the
affairs and assets of the co will be placed under
his control.
Represent the interests of all creditors including
unsecured creditors.

Qualification to act as
Liquidator
S10(1)(a)-(f) CA a person shall not, except with the
leave of Court, consent to be appointed and shall not
act as liquidator of a co if he is subject to any of the
following disqualifications:
a. Not an approved liquidator1
b. Indebted to the co > RM2,500
c. An officer of the co, a partner, employee or
employer of an officer of the co
d. Becomes bankrupt

approved liquidator defined as approved co auditor who has been

approved by Minister. The term liquidator includes the Official
Receiver when acting as a liquidator of a co [S4(1) CA].

Qualification to act as
Liquidator
e.
f.

Assigns his estate for the benefit of his creditors

or makes an arrangement with his creditors pursuant
to any law relating to bankruptcy.
Convicted of an offence involving fraud or
dishonesty on conviction by imprisonment for 3
months or more.

a & c shall not apply to members WU

a & c shall not apply to creditors WU if it is
determined by resolution by a majority of
creditors.
CS, director or any officer may be appointed
as a liquidator
However, approved liquidator is usually
appointed in creditors WU

Appointment & remuneration

of a Liquidator

In members VWU, liquidator is appointed at the same

time as the resolution to wind up the co is passed. The
remuneration of the liquidator is fixed by the co at the
members meeting at the time of his appointment
In creditors VWU, the co and the creditor may at their
respective meeting s nominate liquidator. If diferent
persons were appointed, the person appointed by
creditor shall be liquidator. The remuneration of the
liquidator is fixed by the committee of inspection or
creditor.
Court is given power to appoint liquidator in VWU if no
liquidator is acting.

Appointment & remuneration

of a Liquidator

In compulsory WU, Court will appoint a

liquidator who in effect replaces the directors
and takes control of the co.
In compulsory WU, the liquidator entitled to
receive such salary by way of a % as determined
by agreement between the liquidator and the
committee of inspection

Statutory Duties of
Liquidator

Liquidators account (Lodge Form 75

(S281)) statement of the position of the
WU within one month
After expiration of the period of 6 months from
the date of his appointment
Of every subsequent period of 6 months after his
appointment; and
After he ceases to act as a liquidator

Liquidators account
(S281)

Be audited by an approved co auditor. For the

purpose, liquidator shall furnish the auditor with
such vouchers and information required.
Auditor may inspect any book of accounts kept by
liquidator.
Cost of audit fixed by official Receiver and be part
of expenses of winding up.
A copy of account shall be kept by liquidator and
shall be open to the inspection by any creditor or
any person interested at the office of the
liquidator

Statutory Duties of
Liquidator

Annual meeting (S271)- if VWU

continues for more than a year, within 3
month of each anniversary of the
commencement of WU summon a
GM of co -in a members WU
GM of co and creditors - in creditors WU

Statutory Duties of
Liquidator

Lodge return (S280) for changes of

address (Form 73) and vacation of office
(Form 74) within 14 days after the events.

Unclaimed asset (S286)- pay all

unclaimed dividend and other money
which remained unclaimed for more than
6 months the moneys become payable;
and all unclaimed money arising from the
property after making final distribution.

Statutory Duties of
Liquidator

To recover in respect of certain sales to or

by co (S295)

Invest surplus funds on general accounts

(S285)

Contributories

S4(1) defined as a person liable to contribute

to the assets of the co in the event of its being
wound up, includes the holder of fully paid
shares in the co
S214(1) every present and past members for a
WU co shall be liable to contribute to the assets
of the co to an amount sufficient to meet its
debt, costs, charges and expenses of the WU

Contributories- past/present
members

Past member shall not be liable to contribute

if he ceased to be a member for 1 yr or more
prior to the commencement of the WU
Past member shall not be liable to contribute
in respect of any debt of the co contracted
after he ceased to be a member
Past member shall not be liable to contribute
unless it appears to Court that the existing
members are unable to satisfy the
contribution required to pay debts and costs
and adjusting the rights of the contributories

Contributories- past/present
members

Co limited by shares, no contribution required

from any member whether present or past
exceeding the amount of their unpaid shares.

Committee of inspection

Functions to assist and supervise the acts of

the liquidator
In creditors VWU, the creditors may appoint
a committee of inspection consisting < 5
persons and the co is entitled to appoint 5
persons to act as members of the committee
A member of the committee is in a fiduciary
position and cannot, for example, buy any of
the cos assets from the liquidator except
with the leave of the Court