Winding Up Changes

By Gan Jer Nynn


The Movement Control Order has had a huge impact to the general business environment. On 6th April 2020, the Prime Minister of Malaysia announced the Additional PRIHATIN SME Economic Stimulus Package, where the Companies Commission of Malaysia (“SSM”) is involved in some of the initiatives.

On 10th April 2020, the Minister of the Domestic Trade and Consumer Affairs, Datuk Alexander Nanta Linggi, announced five additional initiatives to assist in reducing the burden amongst the corporate sector. These measures are also implemented to protect the interest of, inter alia, companies which are in the midst of a business cash flow crisis, which increases the possibility of the companies being wound up due to the possible rising debt to their creditors.

What is winding up?

Winding up is the process of dissolving a company, either voluntary or made compulsory by the court. The assets of the company will then be collected and realised, and the proceeds collected will be used to discharge the company’s debts and liabilities. The remaining balance (if any) will then be distributed amongst the contributories according to their entitlement.

Additional Initiatives by SSM

Amongst the initiatives announced by SSM pertains to section 466 of the Companies Act 2016 (“CA 2016”), which defines “inability to pay debts”.

SSM has announced that the value of indebtedness is increased from RM10,000 to RM50,000 until 31st of December 2020. This measure of raising the threshold of indebtedness of a company is with the aim of reducing the number of companies being wound up, considering the financial burden faced by companies.

Pursuant to the Companies (Exemption) (No.2) Order 2020 which came into force on 23rd April 2020, the duration for a company to respond to any notice of demand under Section 466 (1)(a) CA 2016, which is served within the period from 23rd April 2020 to 31st December 2020, has been extended from 21 days to a period of 6 months from the date of service.

This means that a creditor cannot commence a winding up proceedings against you until the 6-month time period is expired.



Based on the above changes in the winding up threshold, together with the initiatives provided by both the government and SSM, it is with hope that the temporary measures in place would help ease the financial burden and responsibilities experienced by companies.

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