Introduction

In layman terms, liquidation is the process by which a company is brought to an end, and the assets and property of the company redistributed. Liquidation is a method whereby the corporate structure of the company is dismantled and its property administered for the benefit of the creditors and members. Both compulsory and voluntary winding up entail the appointment of a liquidator. The primary function of the liquidator is to carry through the winding up process with a view to final dissolution of the company. Subdivision (2) of Division 4, Part X of the Act contains the main provisions relating to liquidators. A liquidator (who is normally an accountant who possesses the pre-requisite license) will be appointed to be in charge of the liquidation process. The liquidator takes full control of the company by collecting and realizing all its assets, settle all the creditors claims and distributes the surplus (if any) to its shareholders in accordance with their respective rights accorded under Section 292 of Companies Act 1965.

Appointment of Liquidators

The rules applicable for the appointment of a liquidator in a compulsory winding up are found in section 227 of the Act and may be summarised as follows.

a) If an approved liquidator other than the Official Receiver is not appointed to be the liquidators of the company, the Official Receiver, by virtue of his position, assumes the position of provisional liquidator until he or another person as appointed, b) If no liquidator is appointed the Official Receiver must summon separate meetings of creditors and contributories to decide whether an application to court is to be made for appointing a liquidator in place of the Official Receiver, c) To court has power to make an appointment according to the determination of the meetings of the creditors and contributories and if there is a difference of opinion, the court may make such order as it thinks fit, d) If a liquidator is not appointed by the court, the Official Receiver becomes the liquidator, e) The Official Receiver shall by virtue of his office be the liquidator during any vacancy, and f) Any vacancy in the office of a liquidator appointed by the Court may be filled by the court.

If, in the winding up of a company by the court, a person other than the Official Receiver is appointed liquidator, that is not authorised to act as liquidator until he has notified his appointment to the registrar and given security in the prescribed manner to the satisfaction of the official receiver: section 228 (a) of the Act. He also obliged to give the Official Receiver such information and such access to and facilities for inspecting the books and documents of the company, and generally such aids may be requisite for enabling that officer to perform his duties under the Act. Official liquidators come under the supervision of the Official Receiver.

Where in a compulsory winding up of a company a person other than the Official Receiver is the liquidator the Official Receiver must take cognizance of his conduct and if the liquidator does not faithfully perform his duties and duly observe all legal requirements, or if any complaint is made by any creditor or contributory in regard thereto, the official receiver is obliged to inquire into the matter, and take such action thereon as he may think expedient1 The conduct of the official receiver is under the supervision of Minister 2. He obliged to take cognizance of the conduct of the Official Receiver and of all Assistant Official Receivers who are concerned in the liquidation of companies, and if any such person does not faithfully perform his legal duties, or if any complaint is made to the minister by any creditor or contributory in regard thereto, the Minister must inquire into the matter, and take such action thereon as he may think expedient, and may direct and investigation to be made of the books and vouchers of that person. By virtue of act3, a liquidator appointed by the court must be the official receiver or an approved liquidator. This requirement is not applicable in a members or creditors voluntary winding up by virtue of section 10 (2) of the Act. Even a director or other officer of the company may appoint liquidator in a voluntary winding up, subject to the approval by a simple majority of the creditors meeting in the case of a creditors voluntary winding up.

Under section 10 (1) if the Act, a person is disqualified from acting as a liquidator if he:

Is not an approved liquidator Is indebted to the company or related corporation in an amount exceeding two thousand five hundred ringgit. Is an officer of the company, a partner, employer or employee of an officer of the company, becomes bankrupt Assigns his estate for the benefit of his creditors or makes an arrangement with creditor, or Is convicted of an offence involving fraud and dishonesty punishable by imprisonment for three months or more.

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Section 229 (2) Section 230 3 Section 8 (3) and 227

Removal of liquidators
He may be removed for cause under section 266 of the act. The circumstances under which the court will exercise its powers to remove a liquidator under the Singapore equivalent of section 266 were considered in Chua Boon Chin v JM McCormack & Ors4. In this case, plaintiff applied for the removal of the defendant as the liquidators of Cycle & Carriage Co (Realty) Ltd and that they will be replaced by Messrs Beaton and Repton. The company had 8 directors at whom the first d McCormack was one. The other two defendants, Pollett and one Tan were accountants practising in partnership with the first defendant. The company was voluntarily wound up and the defendant was appointed liquidators. The plaintiff alleged misfeasance on the part of the liquidators. In allowing application, court held that: 1. If the court was satisfied on the evidence before it, that it was against the interest of the liquidation ( all those interested in the company being liquidated), that a particular person should be made liquidator, then the court had power to remove the present liquidator and then to appoint some other person in his place; and 2. The plaintiff in this case had made out the prima facie case of misfeasance against the directors of the company. The question for determination by the court is whether under all the circumstances of the present case due cause has been shown for the removal of the liquidator. In attempting to determine this question, firstly it is pertinent to note that we are dealing with a case where one of the liquidators is also a director and has been a director in the company since its inception and the fact that as such he is closely connected with the directors... It follows that a liquidator can be removed if the cause shown points to some unfitness of the person in the test lay down by Jessel M.R5 and also where the court exercises its discretion if satisfied on the evidence before it that it should be appointed liquidator. The defendant is one of the liquidators; he is also director of the company and has been so since its inception; he has also been a secretary of the company which capacities have brought him in close relationship with the other directors of the company and as a director he
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[1979] 2 MLJ 156 Re Sir John Moore Gold Mining Co (1879) 12 Ch D 325

can be said to have an interest which might interfere with his duties as liquidator e.g. If during the course of the liquidation a stage is reached where he has to decide whether or not to commence legal proceedings against the directors, a most ludicrous situation will arise when he has to decide whether in his capacity as liquidator he must sue himself as director.