What does it mean by holding company?
– Is not directly defined under section 5
– S5(1)(a)- Deemed to be a subsidiary of a holding company if the holding co. with respect to the subsidiary, if the holding company:
a) Controls the composition of the BOD of the subsidiary company
b) Controls more than half of the voting power of the subsidiaries
c) Controls more than half of the issued share capital of the subsidiaries
– S5(1)(b) – a corporation is also deemed to be a subsidiary if it is a subsidiary of a holding company that itself a subsidiary-
Which section state about the ultimate holding company and wholly owned subsidiary?
– S5A – A corporation is an ultimate holding company of another corporation if:
a. That other corporation is a sub is that holding company
b. The holding company is not itself a subsidiary of another
– S5B- A corporation is wholly owned subsidiary if none of its members is a person other than
a. Its holding company
b. A nominee of its holding company
c. Another wholly owned subsidiary of the holding company, or
d. Nominee of such a wholly owned subsidiary
What does it mean by related corporation?
– S6 – Corporation is deemed to be related to each other where a corporation:
a. Is the holding company of another corporation
b. Is a subsidiary of another corporation
c. Is a subsidiary of the holding company of another corporation
What does it mean by foreign company?
– S4(1) – Foreign Company means:
a. A company, corporation, society, association, or other body incorporated outside Malaysia
b. An incorporated society, association or other body which under the law of its place of origin may sue and be sued, or hold property in the name of the secretary or other officer of the body of or association duly appointed for that purpose and which does not have its head office or prncipal place of business in Malaysia.
What is the definition of winding up?
– There are two types of winding up:
a. Compulsory Winding Up
It is a winding up by an order of the court which is initiated by the presentation of a petition by a person who is entitled to do so.
b. Voluntary Winding
A voluntary winding up should commence where a provisional liquidator has been appointed before the resolution for voluntary winding up was passed and in any other case, at the time of passion of the resolution for voluntary winding up. S255(6)
When can a company winding up by the court under section 218?
There are a few circumstances in which company may be wound up by court.
(1) The court may order the winding up if: (MC DOS D)
(a) The company has by special resolution resolved that it be wound up by the Court
(b) The company has defaulted 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 below two
(e) The company is unable to pay its debt
(f) The Directors have acted 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 member.
What are two things that must be shown before the court make a winding up order on a petition?
Two things to be shown before the court will make a winding up order on a petition are:
a. That the petitioner had the right to present the petition
b. That one of the grounds set out in the Acts as justifying a winding up has been made out.
When a company is considered as unable to pay its debt?
A company is deemed to be unable to pay its debt if any one of the following circumstances is shown to exist:
a. The petitioner has delivered to the company at its registered office, a written demand for payment of all debt owing to him of at least RM500 and within the ensuing three weeks, the company has neither paid the debt nor given security for the payment
b. A judgment has been obtained against the company for the debt and an attempt to obtain payment out of the company’s assets remain unsatisfied, or
c. The court is satisfied that the company is unable to pay its debt.
Who are the parties who can apply for winding up of an company?
Section 27(1) of CA 1965 provides that the following persons may petition for the winding up of a company:
a. The company itself
b. Any creditor, including a contingent or prospective creditor of the company
c. A contributor or any person who is the personal representative of a deceased contributory or the trustee in bankruptcy or the Official Assignee of the estate of a bankrupt contributory.
d. The liquidator
e. The minister pursuant to section 205 or on the ground specified in section 218(1)(d)
f. Bank Negara Malaysia
g. The registrar on the grounds specified in section 218(1)(m) or (n)
What does it mean by contributory in winding up process?
– Contributory include every person liable to contribute to the assets of the company in the events of its being wound up.
– It includes the present members and certain past members of the company
– It has been held that a holder of fully paid up share is a contributory and entitled to present a petition.
– Section 217(2) provides exceptions whereby contributory may not present a petition on any of the grounds specified in section 218(a),(b),(c),(e) or (l) unless
a. The number of members is reduced below two, or
b. The shares allocated to the contributor, or have been held by him and registered in his name at least 6 months during the 18 months before the presentation of the petition or have devolved on him through the death or bankruptcy of a former holder.
How voluntary winding up can happen?
– It happened where a provisional liquidator has been appointed before the resolution for voluntary winding up was passed and in any other case, at the time of passion of the resolution for voluntary winding up (S255(6)).
– The resolution may be of two types:
a. Ordinary resolution
It passed when the articles provide that the company is to be wound up when a specified purpose has been achieved or a specified period has elapsed.
b. Special Resolution
It requires no ground for winding up and is used in any other case such as a solvent liquidation.
– Two types of voluntary winding up are:
a. Member Voluntary Winding Up – where the company is solvent
b. Creditor Voluntary Winding Up – where the company is insolvent
What are the effects of an order for winding up?
– If an order is made it is retrospective in effect to the date on which the petition was presented to their court which becomes the date of commencement of liquidations (S219(2))
– Among the legal consequences of an order court for winding up are:
a. The effective dismissal of the directors and employees
b. A stay of any execution of a judgment against the company and of any legal proceeding in which it is either plaintiff or defendant.
c. A standstill on any disposition of assets or transfer of shares (unless approved by the court) from the date of commencement of liquidation S226.
What are three types of application that commonly used for winding up?
a. Application by the company
Section 217(1)(a)
– Allows the company to apply to have itself compulsorily wound up. The general meeting is the appropriate organ to determine that the company be wound up.
– Application by a company for its compulsory winding up is quite rare. Usually, if the members wish to liquidate their company, they will do so by a voluntary winding up. A voluntary winding up does not involve a court hearing and so is cheaper.
– On the other hand, a voluntary winding up can only be initiated by a special resolution which requires 3 quarters majority, whereas under S217(1)(a), a compulsory winding up only requires an ordinary resolution.
– In some circumstances, the members may desire to place the company into liquidation as quickly as possible.
– If this is the case, a compulsory winding up may be preferred over a members’ winding up, because meetings at which ordinary resolutions are to be proposed require less notice than meetings at which it is proposed to pass special resolution
b. Application by the creditors as a ground for compulsory liquidation
Section 218(1)(e)
Usually the vast majority of applications for compulsory winding up are presented by creditors on the grounds, i.e. the company is unable to pay its debt
S217(1)(b)
Permits a creditor, a contingent or a prospective creditor to apply for a compulsory winding up. This section enables creditors to apply for a compulsory winding up even though their debts are not immediately due and payable at the date of application
– Case: RE William Ltd
– It was held that a person who is owed a debt by the company, which is still unpaid at the date of the application for winding up is a creditor
c. Application by the contributories as a ground for liquidation (S217(1)(C)
– Section 4 (1) defines a contributory to includes
a. A person liable as a member or past member to contribute to the assets of the company in the event of winding up
b. A holder of a fully paid shares in the company
This definition of a contributory, in the case of a company limited by shares, includes persons who at the commencement of the winding up, held either fully paid or partly paid,even though strictly speaking, only a holder of partly paid, is able to contribute an amount on the winding up. Not only the contributories must hold the shares, their names must also be entered in the register of membership.
S214 (1)
Past members may also be liable to contribute to the assets of a company if they were members within one year of the commencement of winding up and the present members are unable to satisfy the full extent of their liabilities.
E.g. past member ceased to be a member for 1 or more years before the commencement of the winding up (a) till (g)
S215
A contributory’s liabilities is that of a specialty debt. This diminishes the effect of the statute of limitations as a specialty debt can be enforced within 20 years of the liquidator making the call. The debt accrues from the contributory at the time that he or she is liable and becomes payable at the time when calls are made to enforce the liability.
What does it mean by contributory in winding up process?
– Contributory include every person liable to contribute to the assets of the company in the events of its being wound up.
– It includes the present members and certain past members of the company
– It has been held that a holder of fully paid up share is a contributory and entitled to present a petition.
– Section 217(2) provides exceptions whereby contributory may not present a petition on any of the grounds specified in section 218(a),(b),(c),(e) or (l) unless
a. The number of members is reduced below two, or
b. The shares allocated to the contributor, or have been held by him and registered in his name at least 6 months during the 18 months before the presentation of the petition or have devolved on him through the death or bankruptcy of a former holder.
What are three classes of shares?
a. Ordinary shares
– Also known as equity shares
– Typically carry normal rights without special definitions
– Equity = Net value of real property= Appraised Property Value-unpaid debts
b. Preference Shares
S4 Of CA1965
It is a share which does not entitle the holder thereof to vote at general meeting or to participate beyond a specified amount in any distributions, whether by way of dividend or redemption in a winding up or otherwise
– Also known as preferred shares
– Typically a higher ranking share than ordinary share
– May or may not carry voting right
– Will paid out in assets before the common stockholders after debt holders in winding up
c. Redeemable shares
– Are those shares that carry a right by the company to buyback the shares
What does section 18(1)(c) said about capital structure?
It stated that the amount of capital which a company proposes to be registered must be stated in the MOA which called authorized capital and the company cannot allot shares more than authorized in its MOA. Any such allotment is void.
What section described about the power of the company to alter its share capital?
S62 of CA 1965
A company may alter its authorized capital in general meeting by the creation of new shares or consolidated or divide all or any of its shares capital into shares of larger amount
S62(1)(C) of CA 1965
Fully paid up shares may also be converted into stock. Stock unlike shares, it does not exist as discrete unit but as fund
S99(1) of CA 1965
Shares must be numbered but stock need not be
What are three kinds of share capital?
a. Authorized share capital
– It is the amount which the company can issue
– S18(1) Required all companies except unlimited state in MOA amount of share capital.
b. Issued share capital
– It is the nominal value of share capital that actually issued.
– For example, 100 authorized capital of which 50 RM1 share have been issued
c. Reserve or uncalled capital
– A company may issue share and not receive the full par value immediately
– The amount unpaid called reserved @ uncalled capital
