QUESTION 2

Discuss the duties and responsibilities of a Liquidator in a winding-up by the Court

with reference to the CA 2016 and cases

A liquidator is a person who has been appointed to wind up the affairs of the company.
In Malaysia, liquidator could be the DGI, a government official designated to be in
charge of the administration of bankruptcy and winding up matters in Malaysia. S. 2
of the Companies Act 2016 provides the definition of an “approved liquidator”, which
is a person who has been approved under S. 433 as a liquidator and whose approval
has not been revoked.

This said liquidator has to be qualified. A person cannot be appointed as liquidator of

a company if he is not an approved liquidator, if he is indebted to company exceeding
RM25,000, if he is an officer of company, if he is a partner, employer or employee of
company’s officer, if he has made arrangement with or for the benefit of his creditors
under any law relating to bankruptcy or if he is convicted of an offence either
involving fraud or dishonesty. On 21/1/2020, the Accountant General of Malaysia
issued guidelines for qualification as liquidator which provides that now qualified
persons may apply for liquidator licence under the CA2016. A qualified person is also
known as insolvency practitioners. So the qualified person can apply to be licensed as
liquidators. The provision relating to liquidators in a winding up is stipulated under
Subdivision 8 of the Companies Act 2016. The official liquidator is appointed by
Central Government for each HC. The Official Receiver is appointed at District Court
who shall act as the official liquidator and thus the court don’t have discretion to
appoint private body or person as a liquidator.

S. 476 of CA 2016 provides for interim liquidator. Under Subsection (1) states that
the court may appoint the official receiver or an approved liquidator at any time after
the presentation of a winding up petition and before the making of a winding up order.
Under subsection (2), the interim liquidator shall have and may exercise all the
functions and powers of a liquidator subject to such limitations and restrictions as
may be prescribed in the rules or as the court may specify in the order appointing him.
The appointment of Liquidator will depend on the type of winding up. S. 477 CA
2016 provides that compulsory winding up appointment of liquidator lies before the
court. S. 486 (2) CA 2016 states that the power of liquidator is subject to the control
of the court pursuant to winding up order being granted. In the event that the
appointment of liquidator have yet to be made by the court, the official receiver shall
be deemed to be the liquidator of the company as per S. 477 (1) (d) CA 2016. Also,
appointment of other person as liquidator other than Official Receiver is under S. 478
CA 2016.

S. 478 CA 2016 states that (1) where a person other than the OR is an appointed
interim liquidator or liquidator in a winding up of a company by the Court, the person
(a) shall not act as such until he is given (i) written notice of his appointment to the
Registrar & to the OR & Companies (ii) security in the prescribed manner to the
satisfaction of the OR; and (b) shall give the OR such information and access to &
facilities for inspecting the books of the company & any assistance as may be required
to enable that officer to perform his duties under this act. Subsection (2) states that if
2 or more liquidators appointed by court (unless court expressly state otherwise) (a)
the functions/powers of the liquidators may be performed/exercised by any one of
them/ by both/ all of them jointly; and (b) a reference to the liquidator shall be a
reference to any one of the liquidators. Subsection (3) states that subject to this Act,
the act of a liquidator shall be valid notwithstanding any defects that may afterwards
be discovered in his appointment/qualification.

S. 480 states that when a person other than the OR became the liquidator in a winding
up of a company by court, the OR will take cognizance of his conduct and if the
liquidator does not faithfully perform his duties and duly observed all the
requirements imposed on him or if there is any complaint made in regards to his
performance of his duties, the OR will inquiries into this matter and take action. S.
482 (1) on the other states that where an interim liquidator have been appointed or
when a winding up order has been made, the liquidator shall take into his custody or
under his control all the property to which the company is or appears to be entitled.
S. 485 (1) states that the liquidator shall submit a preliminary report to the court as
soon as possible from the receipt of the statement of affairs as to the amount of assets
and liabilities. Under S. 485 (2) states that the liquidator may as he thinks fit make
further reports stating the manner in which the company was formed and whether in
his opinion any fraud has been committed or any material facts has been concealed in
relation to the company since its formation whether any officer of the company has
contravened the Act and also specified any other matter in which in his opinion is
desirable to be brought to the notice of the court.

S. 486 (1), is to be read together with the 12th Schedule which specified the extent of
liquidators authority, which states that (a) where a company is being wound up by the
court the liquidator may without the authority under para b, exercise any of the
general powers stipulated in Part 1 of the 12 Schedule and (b) where a company is
being wound up by the court, the liquidator may with the authority of the Court or the
committee of inspection, exercise any of the powers specified in Part 2 of the 12th
Schedule. Subsection (2) states that the exercise by the liquidator in a winding up by
the Court of the powers conferred by this section is subject to the control of the Court
and any other creditor or contributory may apply to the Court with respect to any
exercise or proposed exercise of any of those powers. The CA permits a liquidator to
carry on the business of the company (as long as it is the benefit of the winding up of
the company) but for a period of more than 180 days after making of the winding up
order. Such liquidator also must obtain from the Court in order to act. In the case of
Cheah Theam Kheng v City Centre Sdn Bhd (In Liquidation) & Other Appeals, it
states that under ss236 & 237 of CA 2016, liquidator was subjected to control of court
and committee of inspection in administration and distribution of the company assets.
S. 487 (1) states that subject to this Division, liquidator shall, in the administration of
company’s asset and in distribution among its creditors, have regard to any directions
given by resolution of the creditors/contributories at any general meeting / by the
committee of inspection & any directions given by creditors / contributories shall
override any directions given by committee of inspection in case of conflict.
Subsection (2) states that the liquidator may summon general meetings of the
creditors or contributories for the purpose of ascertaining their wishes and he shall
summon meetings at such times as the creditors or contributories by resolution direct
or whenever requested in writing to do so by not less than ten per centum in value of
the creditors or contributories. Subsection (3) states that the liquidator may apply to
the Court for directions in relation to any particular matter arising under the winding
up. Subsection (4) further stipulates that a liquidator shall use his own discretion to
manage the affairs and property of his company and the distribution of its assets.
S. 488 (1) states that every Liquidator shall pay the money received by him into a
bank account as specified by the court. S. 489 states that the Liquidator shall make a
settlement of list of contributories and application of assets. In the case of Yeo Ann
Kiat v Hong Leong Bank Bhd, the COA ordered on the removal of the Liquidator as
the main duty is to wind up affairs of the company and to protect the interest of the
creditors. However, cases of an abandoned housing project, the Liquidator could also
be playing a parallel role of stepping into the shoes of the wound up developer and to
revive the project thus this would be to protect the interests of the purchasers of an
abandoned housing project. In TR Hamzah & Yeang Sdn Bhd v City Centre Sdn Bhd,
the liquidator is an officer of the Court and servant to the Committee of Inspection.
Protector of the interests of the creditors and contributories. Further, it was held that
the Liquidator was removed as the court is obliged to remove the liquidator in limine
if he has failed to act within the spirit and intent of the several provisions of the
Companies Act and more importantly when he acted outside the scope of his
appointment or order of court or failed to protect the interest of the creditors and/or
contributories. In Taman Sungai Dua Development Sdn Bhd v Goh Boon Kim, the
Court of Appeal held that notwithstanding the appointment of provisional liquidators,
directors will still retain residuary powers, eg, to instruct solicitors to oppose the
petition etc.

S. 490 states that a liquidator may apply to the Court (a) for an order that he be
released and that the company be dissolved, if he has (i) realised all the property of
the company or so much as in his opinion can be realised without needlessly
protracting the liquidation; (ii) distributed a final dividend, if any, to the creditors; (iii)
adjusted the rights of the contributories among themselves; and (iv) made a final
return, if any, to the contributories, or (b) for an order that he be released, if he has
resigned or been removed from his office.
S. 472 states that liquidators have a duty to recover all property to which the
Company is entitled including dispositions of company property made after
commencement of winding-up proceedings will be void. Any transfer, mortgage,
delivery of goods, payment, execution or other act relating to property made or done
by or against a company after the commencement of winding up, will be void similar
to the law in bankruptcy. Any transfer or assignment by a company of all its property
to trustees for the benefit of all its creditors shall be void. The onus of establishing
that a certain transaction is an undue preference lies on the liquidator. Liquidators will
also be able to recover debts repaid by the company to certain creditors in preference
to others. In Sime Diamond Leasing (Malaysia) Sdn Bhd v JB Precision Moulding
Industries Sdn Bhd, the appellant prepaid rental and deposit for lease of a machine.
The appellant was later wound up and liquidator demanded the return of the deposits.
It was held that there was no evidence that, on the date of the payment of the deposits,
the respondent was insolvent or that the parties intended to confer a preference on the
appellant.

S. 530 enables a Liquidator to recover cash consideration in respect of property of the

company that has been sold at an undervalue or acquired at an over value to or from
persons connected with the director(s) of the company two years before the
presentation of the winding up petition. S. 197 states that ‘connected person’ is (a) a
member of the director's family, (b) a body corporate which is associated with that
director, (c) a trustee of a trust, other than a trustee for an employee share scheme or
pension scheme, under which that director or a member of the director's family is a
beneficiary or, (d) a partner of that director or a partner of a person connected with
that director.

There are 2 methods of pursuing a claim against a company already wound-up which
are (a) application to Court to commence action against the wound-up company where
the claim cannot be adequately dealt with in the winding- up, eg. claim for
unliquidated damages or (b) s.500 CA2016 by filing the Proof of Debt. In Orix
Leasing Malaysia Berhad v Rossington Consolidated Sdn Bhd; Dunheved Industries
Sdn Bhd (Applicant), the applicant appealed under r.93 against rejection of
unsubstantiated proof of debt by liquidator, the court determine whether the liability
in proof of debt was true & whether liquidator was right in rejecting it. It was held
that applicant failed to prove liquidator act in bad faith, therefore application dismiss.
S. 493 states that liquidator, creditor or contributory of the Company may apply for
termination of the winding up. The Court must first be satisfied that (1) all
proceedings in relation to the winding up of the company ought to be terminated.
Subsection (2) states that the Court may take into consideration, but not limited to, the
following facts (a) the satisfaction of the debts, (b) any agreement by the liquidators,
creditors, contributories and other interested parties or (c) other facts that the Court
considers appropriate. Subsection (3) states that with the making of the Order or such
date as specified in the Order (i) the company ceases to be in liquidation and (ii) the
liquidator ceases to hold office and is released from all liability in respect of any act
done or default made by the liquidator in the administration of the affairs of the
company or otherwise in relation to his conduct as liquidator.
Coming to the last stage, S. 490 (a) states that the liquidator may apply for an order of
release upon completion, all company properties had been realised, final dividend
distributed to creditors, rights of contributories were adjusted and made final return to
contributories. S. 490 (b) states on the order to be released, if he has
resigned/removed. S. 491 (2) (b) states to lodge a final account. S. 491 states that
court may grant or under S. 492 a power to stay the release, or S. 493 terminate the
winding up. In Vasudevan v ICAB Pte. Ltd, the court may declare the dissolution
void on the application of the liquidator or any interested person

Prepared by ,

Marvin Raja
1161100438