In recent months, I have been approached by many of my business contacts and friends, asking me about closing a Sendirian Berhad (private limited company). More often than not, these entrepreneurs were expecting me to give them a very simple and cost effective solution. To their dismay, some got worried and others were felt threatened with the amount of time and effort required to close a company, let alone the cost and conditions for company closure.
Since I have already written a few articles on company formation and setting up of a company, this is possibly a good time for me to shed some light about extreme opposite, ie. closing a company. There are a few ways to close a company, with certain specific conditions attached to each of them. In general, there are 3 methods, namely:-
- Strike Off
- Members Voluntary Winding Up
- Creditors Liquidation
In this article, I will touch on company strike off only. Strike off falls under Section 308 of the Companies Act 1965. The Companies Commission of Malaysia or “SSM” in short, issued guidelines and procedures that a company need to follow to be qualified for Strike Off. Conditions mentioned in the guidelines are as follows.
At the point of applying for strike off, the company:-
- Must be dormant, ie. neither carrying on a business nor operations. Even if the company was in operations in the past, it is most important that at the point of application, the company is already dormant.
- Has no bank account. Again, even if the company has bank accounts previously, all bank accounts have to be closed before proceeding with the application.
- Has no assets or liabilities. All assets would have been written off, and all liabilities have been settled or waived by the creditors, before the application. Ideally, the balance sheet will be showing the cash in hand amount to be the same as the share capital.
- Does not have any charges in the Register of Charges. This means the company does not pledge any assets for financing or other commitments, in other words, free from encumbrances.
- Settled all penalties and compounds under the Companies Act 1967.
- Has no outstanding tax or other liabilities with any government department or agency.
- Is not involved in any legal proceedings within or outside Malaysia.
- Is not a holding company of another corporate body.
- Did not guarantee or agreed to guarantee to make payment to any other third parties following a certain event or non-event.
Benefit of closing a company via strike off as compared to winding up or liquidation:-
- Cost – The fee for strike off is just a fraction of winding up and liquidation fees. In general, members voluntary winding up fees charged by a liquidator is already in the range of RM5,000.
- Time – The time taken to close a company is very much quicker. From my experience, the strike off process from the point of submitting the application to SSM until receiving the letter from SSM gazetting the company as deregistered is an average of 7 months. However, this timeline should not be used as a point of commitment as there are many factors that can affect the delay.
- Documentation – there is very much less documentation required by SSM as compared to winging up. The basic documentation for strike off are:-a) Statement by the applicant to strike off the company.
b) Members’ Resolution supporting the strike off.
c) Latest management accounts or audited accounts (if required by SSM).
Please note that SSM has the right to request for further documentation, and SSM charges RM120 per application.