ACT 125 COMPANIES ACT 1965 (REVISED - 1973) PART X - WINDING UP DIVISION 2 - WINDING UP BY THE COURT Subdivision (1) - General

Section 218. Circumstances in which company may be wound up by Court.
(1) The Court may order the winding up if (a) the company has by special resolution resolved that it be wound up by the Court; (b) default is made by the company in lodging the statutory report or in holding the statutory meeting; (c) the company does not commence business within a year from its incorporation or suspends its business for a whole year; (d) the number of members is reduced in the case of a company (other than a company the whole of the issued shares in which are held by a holding company) below two; (e) the company is unable to pay its debts; (f) the directors have acted in the affairs of the company in their own interests rather than in the interests of the members as a whole, or in any other manner whatsoever which appears to be unfair or unjust to other members; (g) an inspector appointed under Part IX has reported that he is of opinion(i) that the company cannot pay its debts and should be wound up; or (ii) that it is in the interests of the public or of the shareholders or of the creditors that the company should be wound up; (h) when the period, if any, fixed for the duration of the company by the memorandum or articles expires or the event, if any, occurs on the occurrence of which the memorandum or articles provide that the company is to be dissolved; (i) the Court is of opinion that it is just and equitable that the company be wound up; (j) the company has held a licence under the Banking and Financial Institutions Act 1989 or the Islamic Banking Act 1983, and that licence has been revoked or surrendered; [Subs. Act 276:s.58; Subs. Act 372:s.131] [Am. Act 553:sch.] (k) the company has carried on Islamic banking business, licensed business, or scheduled business, or it has accepted, received or taken deposits in Malaysia, in contravention of the Islamic Banking Act 1983 or the Banking and Financial Institutions Act 1989, as the case may be; or [Subs. Act 372:s.131] [Am. Act 553:sch.] (l) the company has held a licence under the Insurance Act 1996 and-

or (iii) an order under paragraph 59(4) (b) of the Insurance Act 1996 has been made in respect of it.11] Definition of inability to pay debts. Act A1022: s. welfare. decree or order of any court in favour of a creditor of the company is returned unsatisfied in whole or in part. Section 218 of the CA 1965. or (c) it is proved to the satisfaction of the Court that the company is unable to pay its debts. and in determining whether a company is unable to pay its debts the Court shall take into account the contingent and prospective liabilities of the company. .11] (n) the company is being used for any purpose prejudicial to national security or public interest. Circumstances in which company may be wound up by Court. or [Ins. (2) A company shall be deemed to be unable to pay its debts if (a) a creditor by assignment or otherwise to whom the company is indebted in a sum exceeding five hundred ringgit then due has served on the company by leaving at the registered office a demand under his hand or under the hand of his agent thereunto lawfully authorized requiring the company to pay the sum so due. and the company has for three weeks thereafter neglected to pay the sum or to secure or compound for it to the reasonable satisfaction of the creditor. [Ins. Copyright © 2006 PNMB-LawNet. Today we look at one of the few provisions related to this issue. All rights reserved. We re-produce Section 218 below 218. (ii) Bank Negara Malaysia has petitioned for its winding up under subsection 58(4) of the Insurance Act 1996. (1) The Court may order the winding up if (a) the company has by special resolution resolved that it be wound up by the Court.(i) that licence has been revoked. public order. (b) execution or other process issued on a judgment. security. The Companies Act 1965 (CA 1965) includes a provision which allows a party to file a Petition in High Court to wind up a Company. Act 553: sch] (m) the company is being used for unlawful purposes or any purpose prejudicial to or incompatible with peace. Act A1022: s. [Ins. (b) default is made by the company in lodging the statutory report or in holding the statutory meeting. good order or morality in Malaysia.

. received or taken deposits in Malaysia. or scheduled business. fixed for the duration of the company by the memorandum or articles expires or the event. (j) the company has held a licence under the Banking and Financial Institutions Act 1989 (Act 372) or the Islamic Banking Act 1983 (Act 276) and that licence has been revoked or surrendered. (i) the Court is of opinion that it is just and equitable that the company be wound up. if any. (g) an inspector appointed under Part IX has reported that he is of opinion (i) that the company cannot pay its debts and should be wound up.(c) the company does not commence business within a year from its incorporation or suspends its business for a whole year. (h) when the period. (l) the company has held a licence under the Insurance Act 1996 and(i) that licence has been revoked. (d) the number of members is reduced in the case of a company (other than a company the whole of the issued shares in which are held by a holding company) below two. (ii) Bank Negara Malaysia has been petitioned for its winding up under subsection 58(4) of the Insurance Act 1996. as the case may be. or (iii) an order under paragraph 59(4)(b) of the Insurance Act 1996 has been made in respect of it. licensed business. (k) the company has carried on Islamic banking business. or (ii) that it is in the interests of the public or of the shareholders or of the creditors that the company should be wound up. in contravention of the Banking and Financial Institutions Act 1989 or the Islamic Banking Act 1983. or it has accepted. or in any other manner whatsoever which appears to be unfair or unjust to other members. (f) the directors have acted in the affairs of the company in their own interests rather than in the interests of the members as a whole. occurs on the occurrence of which the memorandum or articles provide that the company is to be dissolved. (e) the company is unable to pay its debts. if any.

whilst another line of authority felt that it is all right to file such a Petition. As you may see. and in determining whether a company is unable to pay its debts the Court shall take into account the contingent and prospective liabilities of the company. There have also been a mixed responses from Judges whether the provision can be used if the Debtor has yet to attain Judgment against the owing Company. the very service of a Notice under that Section 218. There have been cases where Debtors file this Petition to pressure the Company to settle the outstanding amount. The case laws are split in the sense that some Judges opine that one must attain a Judgment first before proceeding to the Petition. Section 218 gives you a list of instances where one may file such a Petition. (b) execution or other process issued on a judgment. Kkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkkk kkkkkkkkkkkkkkkkkk COMPANY LAW : Forcing Suffrage to End Suffering (By Lee Shih) . or (n) the company is being used for any purpose prejudicial to national security or public interest. [Am. welfare.(m) the company is being used for unlawful purposes or any purpose prejudicial to or incompatible with peace. good order or morality in Malaysia. Act A1022] DEFINITION of inability to pay debts. if the Company targeted is a Public listed Company. even though that Debtor has not crystalized that debt into a Judgment. decree or order of any court in favour of a creditor of the company is returned unsatisfied in whole or in part. This is a popular method used by debtor to Petition the winding up of a Company which owes the debtor. would trigger the essential response to report to the Stock Exchange. or (c) it is proved to the satisfaction of the Court that the company is unable to pay its debts. public order. with or without a Judgment. and the company has for three weeks thereafter neglected to pay the sum or to secure or compound for it to the reasonable satisfaction of the creditor. security. (2) A company shall be deemed to be unable to pay its debts if (a) a creditor by assignment or otherwise to whom the company is indebted in a sum exceeding five hundred ringgit then due has served on the company by leaving at the registered office a demand under his hand or under the hand of his agent thereunto lawfully authorized requiring the company to pay the sum so due. In some instances.

145 and 150 of the Act. which is also present in section 145 of the Act. holding not less than 10% of the voting rights. Sections 144. such an EGM is convened to allow the members to vote on the removal and replacement of the directors.html RWY wish to thank Mr Lee for graciously allowing us to reproduce his article here. The members themselves do not have a common law right to compel the directors to convene an EGM. The High Court in Granasia Corporation Bhd & Ors v Choong Wye Lin & Ors and another case [2008] 4 CLJ 893 held that a single member could requisition under section 144 of the Act and the Court referred to the Australian decision in South Norseman Gold Mines No Liability v MacDonald [1937] SASR 53. . can rely on the provision. This article was originally featured in Skrine's Legal Insights : Issue 1/2010. to requisition the directors to convene an EGM of the company. legal challenges may then be made based on whether the procedural requirements have been adhered to. (i) “Members” It is likely that notwithstanding the term “members” under section 144 of the Act. One of the important ways in which the members of a company can express their views and concerns about the management of the company is at the general meetings of a company.Below is an article written by a friend of RWY. In a majority of cases.com/2010/04/forcing-suffrage-to-end-suffering. even a single member. You may find the same at this link:http://shih. As a riposte. Ordinarily however. Article 44 of Table A of the Fourth Schedule of the Companies Act 1965 (“Table A”) allows any director to convene an EGM). Mr Lee Shih. The reason for the 10% shareholding threshold under section 144 of the Act. the power to convene an extraordinary general meeting ("EGM") vests in the directors of the company (for instance. SECTION 144 – SHAREHOLDERS REQUISITION DIRECTORS TO CONVENE AN EGM Section 144 of the Act allows members. holding not less than 10% of the voting rights. 145 and 150 of the Companies Act 1965 (“the Act”) provide different mechanisms for the members to convene an EGM.blogspot. This article therefore analyses the three different modes and their requirements for convening an EGM as provided for under sections 144. is necessary to prevent frivolous convening of meetings which would disrupt the administration of the company. Section 144(1) of the Act makes it clear that this statutory right of the members is preserved notwithstanding anything in the Articles of the company. a lawyer in Malaysia. whether by an opposing shareholder faction or the directors themselves.

(iii) Directors Fail to Convene EGM In the event the directors fail to convene the EGM within the 21-day period from the date of requisition. It was held that the duty on the directors to convene an EGM under section 144 of the Act was owed to the requisitionists. Such was the case in the High Court decision of Dato’ Hamzah Abdul Majid & Anor v Wembley Industries Holdings Bhd [1998] 4 CLJ Supp 471 where the directors who had been removed at such an EGM had tried to seek a declaration that the EGM was void for breach of section 144 of the Act. the requisitionists also face a deadline in that the EGM must be held within a period of 3 months from the date of the requisition (Court of Appeal decision of HL Nominees (Tempatan) Sdn Bhd v SJA Bhd & Anor and Another Appeal [2005] 1 CLJ 23). must not delay in holding the meeting (Dato’ Hamzah Abdul Majid & Anor v Wembley Industries Holdings Bhd [1998] 4 CLJ Supp . the directors have 21 days from that date to issue a notice to convene the EGM (section 144(3) of the Act). it would be because it still suited the requisitionists’ purposes. there is the alternative view that any business can be transacted at such a requisitioned meeting if sufficient notice of the necessary resolutions is given (Holmes v Life Fund of Australia Ltd [1971] 1 NSWLR 860). Upon the deposit of the requisition notice. If the meeting was held on a late date. the EGM must be held within 2 months from the date of the deposit of the requisition notice (section 144(1) of the Act).(ii) Requisition Requirements Section 144(2) of the Act lists the requirements of the requisition notice in that it must state the objects of the meeting. The rationale for this time limit is to maintain good order in a company. then section 144(3) of the Act gives the requisitioning members a remedy of selfhelp in that the requisitionists themselves can convene the EGM. However. It is likely that a meeting requisitioned by the members cannot deal with a resolution not included in the objects for which the meeting was requisitioned (Scottish authority of Ball v Metal Industries 1957 SC 315). Nonetheless. Nonetheless. (iv) Members Convene the EGM In exercising their right to convene an EGM under section 144(3) of the Act. such an EGM would not be void. The requisitionists having been conferred the power to convene the EGM. and the requisitionists had not sought to convene one on an earlier date. holding a late EGM would still expose the directors to the general penalty provisions under section 369 of the Act. It is sufficient if the requisition is sent by post to the registered office of the company (Hup Seng Co Ltd v Chin Yin [1962] MLJ 371). it must be signed by the requisitionists and deposited at the registered office of the company. if the directors were to issue the notice to convene the EGM after the 21-day period and the EGM were to be held after the 2-month period from the date of requisition (without objection from the requisitionists). Further.

may be convened by such requisitionist. . not less than 5% in number of members) to directly convene a meeting of the company. SECTION 145 – MEMBERS CONVENING MEETING THEMSELVES Section 145 of the Act allows two or more members. However. (v) Expenses An advantage of requisitioning a meeting under section 144 is that if the requisitionists convene the EGM. Instead of relying on the section 144 mechanism which necessitates waiting for the directors to decide to call an EGM. (ii) Statutory Right? Section 145 of the Act does not contain the wording “notwithstanding anything in its articles” which is present in section 144 of the Act. As long as requisitionists holding one-half of the total voting rights of the original requisitionists convene the EGM. A question arises as to whether there can be a contracting out of section 145 of the Act i. section 145 of the Act gives the advantage of allowing the members to call for such a meeting themselves and this route can be a lot faster. The Court of Appeal in Indian Corridor Sdn Bhd & Anor v Golden Plus Holdings Bhd [2008] 3 MLJ 653 (“Indian Corridor”) had to deal with a question related to such an issue.e. or. holding not less than 10% of the issued share capital (or if the company has no share capital. Article 55 in the respondent’s Articles provided that the directors may convene an EGM and that EGMs “shall also be convened on such requisition. the withdrawal of some of the requisitionists does not affect the right of the others to call the EGM (Canopee Investments Pte Ltd v Landmarks Holdings Bhd [1989] 2 MLJ 469). as provided by Section 144 of the Act. Therefore. The facts involved the two appellant-shareholders convening an EGM pursuant to section 145 of the Act and the respondent-company challenging the convening of the EGM. (i) “Two or more members” While it is likely that a single member can rely on section 144 of the Act.471). it is valid (section 144(3) of the Act). then all reasonable expenses they incur shall be paid to them by the company (section 144(4) of the Act). section 145 makes it clear that two or more members are required in order to convene a meeting under this provision.” One of the main issues in the appeal was whether Article 55 had the effect of contracting out of section 145 of the Act. section 145 of the Act does not give the members a right to be repaid any expenses incurred by them in holding such a meeting. in default. whether the Articles can exclude members relying on section 145 of the Act.

then the notice must be served in accordance with Table A. even if there is reliance on sections 144 or 145 of the Act. The wording of Article 55 did not state that the shareholders shall not resort to their right under section 145 of the Act. In planning the calling of a meeting under section 145. (iv) Service of Notice Section 145(4) of the Act also requires that if the Articles do not make provision for service of the notice on every member having a right to attend and vote at the meeting. For example. an opposing shareholder may refuse to attend the meeting and the quorum requirement under the Articles cannot be met. the decision leaves open the question if the Articles of a company expressly exclude members from seeking recourse to section 145 e.” The Court of Appeal in Indian Corridor distinguished the equivalent Australian provision (section 242(1) of the Australian Companies Code) as that section has the wordings “so far as the articles do not make other provision” which the Australian courts have held allow for the contracting out of the statutory provision (LC O’Neil Enterprise Pty Ltd v Toxis Treatments Ltd [1986] 10 ACLR 337). The Court of Appeal found that while the Australian provision permits a contracting out of its provisions. This question may therefore still be open to interpretation by the courts. SECTION 150 – COURT ORDERED EGM There may be situations where it is difficult or almost impossible to hold a meeting of the company.The Court of Appeal held that on a construction of Article 55. . where the primary obligation is on the directors to issue the notices to call for the EGM. section 145 of the Act has no equivalent. Nonetheless. the inclusion of a phrase along the lines of “EGMs may be convened by such requisitionist only by way of section 144 of the Act and section 145 of the Act is expressly excluded. the members can rely on section 160 of the Act to inspect or to obtain a copy of the register of members of the company to obtain the names and addresses of all the members. The Court is empowered under section 150 of the Act to order a meeting of a company to be called where it is impracticable to call or to conduct a meeting in the manner prescribed by the Articles or the Act. Unlike under section 144 of the Act. the minimum notice in writing must be not less than 14 days or such longer period as provided in the Articles. section 145(2A) of the Act requires that notice in writing of not less than 21 days or such longer period as provided in the Articles. there had been no contracting out of section 145 of the Act.g. the members relying on section 145 of the Act must carry out the issuance of the notices themselves. In the specific case of the convening of an annual general meeting of a public company. (iii) Notice Period Section 145(2) of the Act makes clear that in relation to a meeting of a company.

Corporate Law . even though it may be called. the Court dismissed the application under section 150 and held that it was not impracticable for the members to call a general meeting. In the High Court case ofKemunting Tin Dredging (M) Bhd & Ors v Baharuddin Ma’arof & Ors [1985] 1 CLJ 442. Where the members wish to replace the directors.(i) Applicant The Court may make an order to convene a meeting on its own motion or on the application of a director or any member who is entitled to vote or the personal representative of such a member. There had been a failure on the part of one of the shareholders to attend the EGM and the Court allowed the application under section 150 of the Act to call for an EGM and directed that the quorum at the meeting be one member. there were only two shareholders and the quorum requirement for a meeting was two. In both the High Court cases of Low Son Siang v Lee Kim Yong [1999] 1 CLJ 529 andPhuar Kong Seng v Lim Hua [2005] 2 MLJ 338. (iii) Requirement to Attempt to Requisition Meeting under Section 144 or Section 145 first? Before applying to the Court under section 150 of the Act. (ii) “Impracticable” The onus is on the applicant to show that it is impracticable to call for a meeting of the company in any manner whatsoever or to conduct the meting in the manner prescribed by the Articles or the Act. It was held that the members still had two avenues open to them. they then need not rely on those same directors to call for the necessary meeting. By : Lee Shih at 10:21 PM 0 comments Labels: Company Law. The right to call for meetings is therefore a safeguard to corporate democracy in allowing members the opportunity to vote on company matters. either in reliance of the procedures under section 144 or section 145 of the Act. The word ‘impracticable’ is not synonymous with impossible (Re El Sombrero Ltd [1958] Ch 900 at 904). members who wish to convene a meeting of the company may have to try to resort to section 144 or section 145 of the Act first. The Court can also exercise its power under section 150 if the meeting cannot be conducted properly. CONCLUSION The statutory right for members to call for meetings allows members to express their views and to influence corporate governance.