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Two Methods to Close a Company in Malaysia: Strike-Off or Winding Up
In Malaysia, there are two primary ways to close a company: either through a strike-off or winding up. The Strike-Off method is a fast and straightforward solution, especially when the company is inactive, and the directors no longer wish to bear the costs of maintaining it. In this article, we delve deeper into the Strike-Off option, as it stands out as one of the most affordable methods for closing a company, particularly during these challenging times faced by many businesses in Malaysia.
Under Sections 549(a) and 550 of the Companies Act 2016, it is possible to strike off a Sdn Bhd company in Malaysia. Below, we have summarized the key requirements and process for striking off a company in Malaysia:
1. Initiating the Company Strike-Off Process in Malaysia
Typically, the application to strike off a company in Malaysia is initiated by a director, shareholder, or liquidator of the company. However, the Registrar of Companies also holds the authority to strike off a company on their own accord, by reviewing the company's records in the register.
2. Requirements for a Company Strike-Off Application in Malaysia
- The shareholders must pass a resolution to initiate the application to strike off the company’s name from the register because the company is no longer conducting business or in operation in Malaysia. Suppose a majority resolution cannot be obtained due to untraceable shareholders. In that case, the application can still proceed, provided reasonable attempts were made to locate the shareholders, such as through registered post and documented evidence of other methods.
- The company must have no assets or liabilities, and documentary proof (such as financial statements) must be submitted to the Registrar.
- There should be no outstanding charges listed in the Register of Charges maintained with the Registrar.
- The company must have no outstanding penalties or compound offers under the Companies Act 2016. All such liabilities must be settled before submitting a strike-off application.
- The company should have no outstanding taxes or other liabilities owed to any government department or agency. If the company was operational, all taxes must be settled and a tax clearance obtained before filing the strike-off application.
- The company’s latest information must be updated with the Registrar.
- The company should not be involved in any ongoing legal proceedings, whether within or outside Malaysia.
- The company must not have made any return of capital to shareholders. If capital still exists, the company should instead undergo voluntary winding up to formally cease its existence.
- The company must not be a holding company.
- The company must not be a Guarantor Corporation.
3. Company Strike-Off Procedure in Malaysia
To submit an application under Section 550 of the Companies Act 2016 (CA 2016), the applicant must complete the Declaration-Application to Strike Off Company in Schedule B of the Practice Directive 1/2017 (Appendix 1). It is essential to ensure that all the requirements outlined above are fulfilled before proceeding with the application.
It is highly recommended to consult a licensed Company Secretary in Malaysia to guide you through these procedures and ensure that all necessary documentation and compliance standards are met.
4. Company Strike-Off Process After Application in Malaysia
Once the necessary documents have been submitted, the Registrar will issue a notice stating that a public notification will be made regarding the intended strike-off of the company. If no objections are lodged with the Registrar within 30 days of the notice, the process will proceed.
After the 30-day period has passed, the Registrar will publish the company’s name in the Federal Gazette, officially indicating that the company has been struck off from the register.
5. Grounds for Objection
Any individual may file an objection with the Registrar against the application to strike off a company in Malaysia on the following grounds:
- The company is still actively conducting business, or there are other valid reasons for it to remain in existence.
- The company is involved in ongoing legal proceedings.
- The company is currently in receivership or liquidation.
- The objector is a creditor, a member, or a person with an unresolved claim against the company.
- The objector believes that there is a right of action on behalf of the company and intends to pursue it.
- For any other reason, it would not be just and equitable to remove the company from the register.
These grounds allow concerned parties to ensure that companies with unresolved issues, whether financial or legal, are not prematurely struck off.
6. Withdrawal of Company Strike-Off Application in Malaysia
The applicant has the option to withdraw the company’s strike-off application within thirty (30) days from the date specified in the notice or public notification, as outlined under Section 551(1) of the Companies Act 2016. To do so, the applicant must submit a Notic of Withdrawal of Striking Off Application to the Registrar, stating the reasons for the withdrawal, along with the necessary supporting documents.
7. Reinstatement of a Previously Struck-Off Company
Any individual or shareholder dissatisfied with the Registrar’s decision to strike off a company in Malaysia may apply to the court for reinstatement of the company’s name to the Register. This application must be made within seven years from the date the company was struck off.
Before opting to strike off your company in Malaysia, it is crucial to consider other corporate restructuring strategies that may rescue your business. Closing down should be treated as a last resort.
If you decide to proceed with the strike-off, it is strongly recommended to seek professional advice to ensure the process is handled correctly. At DSA, we offer a wide range of services and expert guidance to simplify the company closure process for you.
FAQs:
Who Can Initiate the Company Strike-Off Process in Malaysia?
The following parties can initiate the company strike-off application process in Malaysia:
- Directors of the company
- Members (shareholders) of the company
- Liquidators of the company
- The Registrar of Companies
Can a Company with Capital Proceed with a Company Strike-Off Application in Malaysia?
If a company still has capital, it cannot proceed with the strike-off application in Malaysia. Instead, it should follow the voluntary winding up process to formally cease its existence.
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When is the Deadline to Withdraw the Company Strike-Off Application in Malaysia?
The applicant may withdraw the application to strike off a company in Malaysia within 30 days from the date specified in the notice or public notification under Section 551(1).
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Is it Possible to Reinstate a Previously Struck-Off Company in Malaysia?
Yes, any individual or shareholder who is dissatisfied with the Registrar’s decision to strike off a company in Malaysia may apply to the court to have the company’s name reinstated in the Register. This application must be made within 7 years from the date the company was struck off.
ικ (LLP) How to close a Limited Liability Partnership LLP in Malaysia.
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Closing a Limited Liability Partnership (LLP) in Malaysia
Due to poor business performance or the company being dormant (inactive), business owners may decide to close their Limited Liability Partnership (LLP) in Malaysia. If the owner(s) of an LLP in Malaysia choose to shut down the business, it is essential to understand the proper procedures for doing so. In this article, we will outline the processes and costs involved in formally closing an LLP in Malaysia.
An LLP in Malaysia can be dissolved in three ways:
- Compulsory Winding-Up by Court
- Voluntary Winding-Up by Partners
- Striking-Off by the Registrar (SSM)
The most common method is voluntary winding-up, which is initiated by one of the LLP’s partners after the LLP has ceased operations and settled all its debts and liabilities. Therefore, we will focus on this method, detailing the process and costs involved in closing an LLP in Malaysia.
Process to Close a LLP in Malaysia
The following outlines the key steps involved in closing a Limited Liability Partnership (LLP) in Malaysia through the voluntary winding-up method:
- The LLP must obtain closure confirmation from EPF (Employees Provident Fund), Perkeso (Social Security Organization), and LHDN (Inland Revenue Board).
- The LLP must submit its final tax return to LHDN and obtain a written clearance from the Inland Revenue Board (IRB).
- Once clearance is obtained from the IRB, a notice for winding up must be sent to all partners of the LLP.
- A notice declaring the winding up must be published in widely circulated Malaysian newspapers.
- The Registrar (SSM) will declare the LLP dissolved if no objections are received. If there are any objections, the dissolution will proceed only upon the withdrawal of such objections by the partners/creditors or if SSM determines that the objections are unjustified.
Costs to Close a LLP in Malaysia
The cost involved in closing a Limited Liability Partnership (LLP) in Malaysia typically ranges from RM3,500 to RM4,500. This amount covers government fes and the cost of newspaper advertisements.
Before proceeding with the closure of an LLP in Malaysia, it's important to explore potential restructuring options that could save your business. Closing down should be considered a last resort.
If closure is unavoidable, it is highly recommended to seek professional advice to ensure that the process is carried out properly. At DSA, we offer a comprehensive range of services and guidance to facilitate the closing of your LLP.
FAQs
What are the three ways to close a LLP in Malaysia?
A: An LLP can be closed down in the following three ways:
- Compulsory winding-up by court
- Voluntary winding-up by partners
- Striking-off by the Registrar (SSM)
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When will SSM declare that a LLP in Malaysia is dissolved?
A: SSM will declare that an LLP is dissolved when no objections are received.
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Is a LLP in Malaysia required to submit any final tax return before closing down?
A: Yes, the LLP is required to submit its final tax return to LHDN (Inland Revenue Board) and obtain a written clearance from the IRB before closing down
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ι How to close a Sdn Bhd company in Malaysia?
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Business owners of a Sdn Bhd company in Malaysia may decide to shut down their business due to poor performance or because the company has become dormant (inactive). It is important for the owners to understand the correct procedures for formally closing a company.
In this article, we will walk you through the processes and costs involved in officially closing a Sdn Bhd company in Malaysia. There are two primary methods for doing so: 1) Strike-Off and 2) Winding Up. Below, we have summarized the key differences in the processes:
1. Strike Off a Sdn Bhd Company
Criteria
Section 551 of the Companies Act 2016 allows shareholders to apply to the Companies Commission of Malaysia (SSM) to strike off a company, provided the following conditions are satisfied:
- The company has not commenced business since incorporation or has ceased operations for an extended period.
- The company has no intention of starting or continuing its business or operations in the future.
- The company has no assets or liabilities, including outstanding charges in the Register of Charges.
- The company does not have sufficient funds to cover the costs of winding up.
- The company has no outstanding penalties or compound offers under the Companies Act 2016.
- The company has no outstanding taxes or other liabilities and is not indebted to any government agencies in Malaysia.
- The company has not returned any capital to shareholders.
- The company’s information with the Registrar is up to date.
- The company is not involved in any legal proceedings, whether in Malaysia or abroad.
- The company is not a holding company or a subsidiary of another corporate entity.
- The company is not a Guarantor Corporation.
Account Closure Confirmation from Government Agencies
Before proceeding with the strike-off application, the company must obtain closure confirmation from relevant government agencies, such as EPF (Employees Provident Fund), PERKESO (Social Security Organization), and LHDN (Inland Revenue Board of Malaysia). Additionally, if the company is due for a tax refund, it should only proceed with closing its bank accounts and submitting the strike-off application after receiving the tax refund.
Audited Accounts Requirement
For companies that were previously active or had assets and liabilities, SSM will require the submission of up-to-date audited accounts before accepting the strike-off application.
However, for companies with no assets and liabilities, SSM may accept unaudited management accounts. Nevertheless, SSM reserves the right to request audited accounts at its sole discretion, even after the strike-off application has been submitted.
Processing Time
The entire strike-off process typically takes between 6 to 12 months to complete.
Strike-Off Initiated by SSM
In accordance with Section 549 of the Companies Act 2016, SSM may initiate the strike-off of a company if it fails to submit its annual return for three or more consecutive years.
Costs to Strike Off a Company
The cost to strike off a company ranges from RM 2,500 to RM 3,500, depending on the complexity of the company’s status.
2. Winding Up a Sdn Bhd Company
Criteria
The winding up process is more complex and can be categorized into Voluntary Winding Up and Compulsory Winding Up. This process typically involves a court application and the appointment of a liquidator to manage the entire winding up process. For a detailed explanation, refer to the article below covering the steps involved.
In brief, winding up a Sdn Bhd company in Malaysia requires legal proceedings, and the costs usually start from RM10,000 due to the involvement of court applications and liquidator appointments.
Before opting to close a Sdn Bhd company, it is advisable to explore potential restructuring options to rescue the business. Closig down should be considered as a last resort.
If winding up is the only option, it is strongly recommended to seek professional advice to ensure the process is conducted properly. At DSA, we offer a wide range of services and expert guidance to help ease the process of closing a Sdn Bhd company.
FAQ
What are the two ways to close a Sdn Bhd company in Malaysia?
A: The two key methods to close a Sdn Bhd company in Malaysia are strike off and winding up.
Can a Sdn Bhd company closing in Malaysia submit unaudited management accounts to SSM?
A: Companies without assets and liabilities can submit unaudited management accounts to SSM. However, SSM retains the discretion to require audited accounts after the strike-off application.
What is the processing time to close a Sdn Bhd company in Malaysia through strike-off?
A: The strike-off process typically takes 6 to 12 months to complete.
What is the difference in cost between the two methods of closing a Sdn Bhd company in Malaysia?
A: The cost for striking off a company ranges from RM2,500 to RM3,500, depending on the company's complexity. For winding up a company, costs start from RM10,000.
