Liquidation Advisory
Liquidation is the formal process of winding up a company’s affairs, which involves realizing the company’s assets, settling outstanding liabilities, and distributing any remaining funds to shareholders. The process can be initiated voluntarily by the company’s directors and shareholders, or compulsorily through a court order—typically when the company is insolvent and unable to meet its financial obligations.
A licensed liquidator, typically a qualified accountant, is appointed to oversee the liquidation process. The liquidator assumes full control of the company, including the collection and realization of assets, settlement of creditors’ claims, and distribution of any remaining surplus to shareholders.
There are 2 modes of Liquidation under Malaysian Law:
- Voluntary Winding-Up; and
- Compulsory Winding-Up
Voluntary Winding-Up
a) Members’ Voluntary Liquidation (“MVL”)
MVL is initiated by a company’s shareholders when the company is solvent and able to settle all its debts in full within 12 months. The directors must make a declaration of solvency to proceed. This mode is commonly used for corporate restructuring, group simplification, or when the company is no longer required.
b) Creditors’ Voluntary Liquidation (CVL)
CVL takes place when a company is insolvent and unable to meet its debt obligations. The process is initiated by the directors, but control quickly passes to the creditors, who appoint a liquidator. This process ensures fair treatment of creditors and facilitates the orderly winding-up of the business.
Compulsory Winding-Up
Compulsory liquidation occurs when a court issues a winding-up order upon receiving a petition from an entitled party. This process is governed by the Companies Act 2016.
The court will grant the order only if two conditions are met:
- The petitioner has the legal standing to file the petition; and
- The petition fulfills one or more grounds listed under Section 465 of the CA 2016, justifying the winding-up of the company.
ECOVIS Malaysia offers comprehensive support to help you navigate the liquidation process with confidence and clarity.