JUNE 2018 Q2 - Sutera Hijau

The issue is what would be the best way to wind up the Sutera Hijau Sdn Bhd?

Winding up (liquidation) issa process where a liquidator will sell of the company’s assets and
distribute the proceeds among the company’s creditors and if there is any excess, will be given
to the members. It occurs when the company want to end its life or upon the application of the
creditors.

Aim : to pay off company’s debt

TWO TYPES

Basically, there are two manners in which company could be wound up namely voluntary
winding up and compulsory winding up. Voluntary winding up is largely initiated by the
shareholders when the company is solvent and governed under s 432 (2) CA 2016. Meanwhile,
where the company is insolvent, the directors can decide to no longer carry on the business due to the
company’s liabilities. This is where compulsory winding up takes place.

Based on the situation given, compulsory winding up is the relevant manner of winding up to be
discussed.

COMPULSORY WINDING UP

As explained under Section 432(1)(b) CA, winding up of a company may be effected by way of
winding up order made by the court. It is a winding up by the order of the court which is initiated
by the presentation of a petition by a person who is entitled to do so. The petition can be
presented in the High Court of Malaysia. The court may not make a winding up order unless it is
satisfied that the voluntary winding up cannot be continued with due regard to the interest of the
creditors or contributories.

REQUIREMENTS :
1. WHO HAS THE RIGHT TO PETITION FOR THE COMPULSORY WINDING UP OF A
COMPANY? - listed in the Act
2. GROUNDS - WHEN CAN A COMPANY BE WOUND UP BY THE COURT

Before the court makes a winding up order on a petition, there are two elements to be proven. First,
that the petitioner had the right to present the petition - Section 464(1) (a) to (h) persons who may
petition for CWU. Applying S 464 (1)(a) to the situation in question, the board of directors of SHSB
may make the petition for CWU on behalf of the company.

Second, the petitioner must prove one of the grounds set out in the Act. Section 465 (a) to (l) –
circumstances in which the court may order winding up. Usually, the common ground where
majority of application for compulsory winding up are presented by creditors isunder proviso (e) &
(h) i.e the company is unable to pay its debts.

(e)The company is unable to pay its debts;

(h) The court is of the opinion that it is just and equitable to wind up

Applying to the situation involving SHSB, the relevant ground to justify the winding up petition is
proviso (e). It was stated in the fact that SHSB is deeply indebted to most of its creditors.

WHEN DOSE A COMPANY REGARDED AS UNABLE TO PAY ITS DEBT

In regards to proviso (e) it is important to further determine when or in what situation a

company is said to be unable to pay debts? Reference can be made to Section 466 (1)
(a) The company is indebted in a sum exceeding the amount as may be prescribed by the Minister
and a creditor by assignment or otherwise has served a notice of demand..neglected the demand
(b) Execution or other process issued on a judgment, decree or order of any court in favour of a
creditor of the company is returned unsatisfied in whole or part;
(c) it is proved to the satisfaction of the Court that the company is unable to pay its debts and in
determining so, shall take into account the contingent and prospective liabilities of the company.

Applying to the situation of SHSB, it was mentioned SHSB did not comply with the court order
requiring it to pay a sum of rm100k to 3 creditors who hv brought a legal action against the company.
Since there is a failure to execute the court order above, SHSB is said to be unable to pay its debt
within the ambit of Section 466(1)(b).

Re william case - ‘creditor’

CASES

Jurupakat Sdn Bhd v Kumpulan Good Earth Sdn Bhd - the court emphasised that the essential
element for a winding up order by court is that there must be a valid debt. This is in order to prove
the fundamental requirement of a debtor-creditor relationship. Hence, without a ‘valid debt’, the
petition for winding up will be accordingly dismissed.

In application to the situation of SHSB, there is indeed exist a debtor-creditor relationship. This is
proven by the fact that SHSB is deeply in debt to most of its creditors and in fact, not able to comply
with the court order to settle the sum of rm100 000 to its 3 creditors. Hence, with a valid debt, the
petition for winding up may be considered by the court and the court will make an order for w.up.