12 reasons why a company may be ordered to wind up: What every business owner should know.
As a business owner, you've poured your heart and soul into building your company from the ground up. However, despite your best efforts, there may come a time when you're faced with the difficult decision of winding up your business. But when can the Court order the winding up of your company?
In this article, we'll explore the 12 reasons why a company may be ordered to wind up according to section 465 of the Companies Act 2016. So, whether you're just starting out or have been in business for years, read on to find out what you need to know to avoid winding up in Court.
1. If the company has passed a special resolution to wind up the company by the court: This means that the shareholders of the company have passed a resolution to wind up the company, and have requested that the court supervise the process.
2. If the company fails to lodge the statutory declaration required under section 190(3) of the Act: Companies are required to file a statutory declaration with the Registrar of Companies within 30 days of their incorporation. If the company fails to do so, it may be deemed to be in default and could face winding up proceedings.
3. If the company has not commenced business within a year of its incorporation or has suspended its business for a whole year: If the company has not started operations within one year of its incorporation or has suspended operations for a whole year, the court may order its winding up.
4. If the company has no members: If a company has no members, it cannot function as a legal entity and may be wound up by the court.
5. If the company is unable to pay its debts: If the company is unable to pay its debts as they become due, it may be considered insolvent and may face winding up proceedings.
6. If the directors have acted in their own interests rather than in the interests of the members as a whole or acted in any other unfair or unjust manner towards members: If the directors have breached their fiduciary duties or acted in a way that is unfair to shareholders, the court may order the winding up of the company.
7. If the period fixed for the duration of the company by its constitution has expired, or if an event has occurred on the occurrence of which the constitution provides for the company's dissolution: If the company's constitution provides for its dissolution upon the occurrence of a certain event, or if the period of the company's duration has expired, the court may order its winding up.
8. If the court considers it just and equitable to wind up the company: This is a catch-all provision that allows the court to order the winding up of a company if it deems it just and equitable to do so, even if none of the other grounds for winding up are present.
9. If the company held a license under the Financial Services Act 2013 or the Islamic Financial Services Act 2013, and the license has been revoked or surrendered: If a company has held a license under these acts and the license has been revoked or surrendered, it may be wound up by the court.
10. If the company carried on a licensed business without being duly licensed or accepted deposits in Malaysia in contravention of the Financial Services Act 2013 or the Islamic Financial Services Act 2013: If the company has carried on a licensed business without the necessary license or has accepted deposits in contravention of these acts, it may face winding up proceedings.
11. If the company is 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: If the company is being used for illegal or unethical purposes, it may face winding up proceedings.
12. If the Minister has made a declaration under section 590: Section 590 allows the Minister to declare that it is in the public interest to wind up a company. If such a declaration is made, the company may face winding up proceedings.
Under paragraph (2) of the provision, if the Registrar has commenced
winding up actions against a company under paragraph (1)(k), and has
found that the company is being used for unlawful purposes or any
purpose prejudicial to national security or public interest or
incompatible with peace, welfare, public order, security, good order or
morality in Malaysia, then this finding will be considered prima facie
evidence in all courts and by all persons having the power to take
evidence for the purposes of the Act.
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Disclaimer: This article is published for the purpose of awareness and general knowledge. Any part contained in this article should not be considered as a guide to initiate legal action independently without first consulting an experienced lawyer.
For any further information regarding this article or to schedule a legal consultation session, you may contact your preferred lawyer, or you may reach us via WhatsApp by clicking the yellow image above. Note that the information in this article is accurate at the time of publication and may be subject to change without notice. We will not be liable for any action or failure to act taken based on the information contained in this article.
Nor Hafeez adalah seorang peguamcara sivil yang beramal sebagai seorang peguam dan pemilik penuh sebuah firma guaman yang mempunyai pejabat kecil di pinggir Kuala Lumpur. Beliau mengendalikan pelbagai kes-kes sivil dan pelbagai masalah berkait dengan undang-undang sivil Malaysia seperti kes saman malu, langgar kontrak, hutang peribadi dan korporat, pencerobohan tanah, penceraian bukan islam, harta pusaka, pemecatan kerja, konsultan tuntutan CIPAA dan sebagainya. Di masa lapang, beliau berkongsi ilmu melalui penulisan blog dan sekali sekala menggunakan telefon untuk mengambil dan mengedit gambar secara amatur. Beliau juga adalah seorang glory hunter yang meminati Manchester City dan juga segelas Nescafe Ais diwaktu pagi.
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