In the event that a company has been dissolved, but there are still outstanding assets which have not been dealt with, it is important to understand the legal procedures involved in managing the said assets. This article will discuss on the standard process for handling the outstanding movable assets of a dissolved company.

Pursuant to Section 557 of the Companies Act 2016 (“CA 2016”), any outstanding property will be vested in the Registrar of the Companies Commission of Malaysia (“CCM”). This property encompasses both movable and immovable assets, including things in action, whether located within or outside Malaysia, that, at the time of the company’s dissolution, were either:-

a)    Vested in the company;
b)    The company was entitled to it; or
c)    The company had a disposing power.

Typically, when a company has been dissolved, there should not be any outstanding property left, as the company or its liquidator, depending on the situation, would have disposed of or dealt with the assets before the company’s dissolution. Additionally, the company must make a declaration to CCM confirming that there are no assets of the company still not disposed of and that the company’s liabilities have been settled with or waived.

However, in situations where a dissolved company still possesses property, especially if the company voluntarily struck itself off rather than undergoing winding-up proceedings, those interested in the property have two options:-

1. First, by reinstating the company under Section 555 of the  CA 2016 by filing the necessary Originating Summons before the High Court of Malaya. Once the Court grants the Order for reinstatement, the outstanding property can be dealt with accordingly. 
2. Second, the outstanding property can be acquired from the Registrar of CCM. This process is initiated by the interested party to first notify the dissolved company’s shareholders and directors and obtaining their written consent for the acquisition. 

It is worth noting that the interested party can also be a party associated with the dissolved company, for instance a former director of the said company. The approval, together with the necessary application and supporting documents, should subsequently be submitted to the Registrar of CCM. If all requirements are met with, the outstanding property can be sold to the interested party.

Regarding the proceeds from the sale, the Registrar of CCM is entitled to 30% of the amount, as stipulated in Item 31 of the Companies Regulations 2017. The remaining 70% is allocated to cover the necessary expenses associated with the sale. If there still remains balance, this monies is then transferred to the “Jabatan Wang yang Tidak Dituntut”. If the dissolved company intends to retrieve this remaining monies, the process of reinstating the company under Section 555 as mentioned earlier must be followed.

If the party interested in the assets is the same party having interest in the proceeds, for example, the previous director/shareholder of the dissolved company, it will be advisable to choose the first option, which is reinstating the dissolved company pursuant to Section 555 of the CA 2016.

Reason being, the interested party would need to only undergo one process, that is the reinstatement of the dissolved company. Once the dissolved company is reinstated, the interested party may proceed to deal with the assets accordingly.

The second option is best for those who are interested in the assets but has no nexus with the dissolved company. They will not be entitled to the remaining monies as their purpose is just to obtain the assets for their own use.
In conclusion, while there is still a chance to deal with the outstanding movable assets after the dissolution of the company, it is important to weigh the time involved in the legal proceedings one may need to undertake and the associated expenses. Different types of property may require distinct procedures, supporting documents and legal considerations.

Perhaps, the wisest course of action is to ensure that, when one voluntarily dissolve his/her company, no assets are left behind.

By Rahayu Partnership, Malaysia
Law Firm Website: www.rahayupartnership.com

Introduction

A restraining order (RO), vested in Section 368 of the Companies Act 2016 (“CA”), provides a temporary reprieve from the commencement of any legal proceedings/actions  against a financially distressed company, while it restructures its’ business resources and debts obligations. 

Ex Parte application for an RO

In Mansion Properties Sdn Bhd v Sham Chin Yen & Ors, the CA did not expressly mention that an application for an RO must be made inter parte. Hence, there was nothing objectionable about filing an ex parte application. To prevent the effort of developing and approving  an SOA from being thwarted, applying for an RO is deemed necessary. Moreover, the time constraint faced by distressed companies requires decisions concerning the proposed scheme to be made as soon as possible. A company is vulnerable between the initial formulation of the scheme and the sanction of the court.

Generally, the purpose of filing an ex parte application is to ease applicant companies to seek urgent moratorium protections in due course.  Provided that the RO was applied in good faith, an ex parte application would not warrant it to be set aside  unless such  application  is  an abuse of process of the law and/or there is no special circumstances which are not in conjunction with the practice and procedure before the court. 

(i) Abuse of process of the law

An action may amount to an abuse of the legal process when its legality is used in a manner that do not serve the underlying goal but rather to achieve other collateral purposes. 

In Dynawell (M) Sdn Bhd v Universal Trustee (M) Berhad (Proposed Intervener), Dynawell’s repetitive RO application has indicated that it originated from the same source or author, showing that it has been proposed with the knowledge and involvement of the directors to delay the foreclosure proceedings that commenced in November 2011. At the same time, Dynawell had failed to obtain leave from the winding-up court and had instead filed a separate ex parte application in the present court. 

There has been a blatant disregard of the provision by Dynawell when it had also failed to comply with the mandatory requirement provided in Section 176(1)(a) until (d) of the Companies Act 1965. The RO was then to be set aside due to Dynawell’s mala fide intent of concealing the material facts from the present court. 

(ii) Exceptional/special circumstances

Creditors are allowed to intervene and bring its own proceedings against the company at any time before the scheme is sanctioned by the court, whereby the creditors must be able to prove the existence of ‘exceptional circumstances.’

Creditors’ right to intervene is not absolute. Granting of leave depends on whether there is such special circumstances that can be demonstrated. To do so can be challenging, especially when the courts would be reluctant to accept the mere reason of “having the real possibility of success”. Aggrieved creditors must show that the circumstances are of sufficient weight to overcome the strong imperative to have the claims dealt with under the machinery of SOA. It necessitates a careful evaluation to ensure the claims made align with the overarching objective of the scheme.

The high court in Re Top Builders Capital Bhd & Ors ruled that monetary compensation may not likely grant the creditor the right to intervene, as it would impede the achievement of the scheme since companies need to consider paying off their debts while undergoing rehabilitation. Claiming for monetary relief would procedurally be rejected asit would defeat the whole purpose of an SOA. Ultimately, it shall be the court’s discretion in determining what may amount to ‘exceptional circumstances’ on a case-to-case basis.

Conclusion

The question of whether an RO can be easily set aside would depend on the ground reasoning rooted at the foot of the RO. If the RO is embedded on the basis of an ill-will intent to achieve a deceitful end, the RO can be set aside.

The purpose of filing for an RO is to aid the effort of formalizing an SOA for distressed companies with financial liabilities. Misusing it for personal gain is unjustified under the law and may warrant it to be set aside by courts.

By Rahayu Partnership, Malaysia
Law Firm Website: www.rahayupartnership.com

Introduction

The Construction Industry Development Board (“CIDB”) is a statutory body established under the CIDB Act 1994 (“the Act”). The Act empowers CIDB to be a one stop body to promote and stimulate the development of the construction industry in Malaysia.

Under Section 34(2) of the Act, CIDB is authorised to impose on every registered contractor (but before the commencement of any construction works having a contract sum of above RM500,000.00) a levy of a quarter per centum of the contract sum. 

(1) How the Court Interpret Statutes involving Tax/Levy

Essentially, a levy is a tax and taxing statutes are to be interpreted in the same way as any other statute, that is taxing statutes must be given a purposive interpretation to fulfil the objective of the statute.

In the Federal Court case of LEMBAGA HASIL DALAM NEGERI MALAYSIA V ALAM MARITIM SDN BHD [2014] 2 MLJ 1, it was held that when interpreting provisions of a taxing statute, the intention of Parliament must be construed from the language used and the Court is to interpret it accordingly. If the language is clear, unambiguous and applies accurately to existing facts, the Court shall accept the ordinary meaning. If the words are not so explicit, it is incumbent upon the Court to undertake an exercise to seek out the purpose of Parliament, avoiding both injustice and absurdity.

The Act would be interpreted strictly by the Court within its four corners and the words used.  However, if the words used are vague, it is upon the Court to discover the true intention and/or purpose of the Parliament in enacting the said statutes.

(2) Whether the Act applies to Offshore Construction Works

Section 34 spells out the obligations of a contractor under the Act. Those obligations are divided into two, firstly the contractor needs to declare and submit to the CIDB any contract (having a contract sum of above RM500,000.00) that has been awarded to the contractor. Secondly, there is a levy quarter per centum of the contract sum imposed to the said contractor.

Subsections (1) and (3) require a contractor to declare their contracts to the CIDB, failing which under subsection (10), the contractor shall be liable to a fine not exceeding RM50,000.00.

Subsections (2) and (4) provides for the contractor to pay the levy imposed on them by the CIDB, failing which subsection (9) provides for a fine not exceeding RM50,000.00 or four times the amount of such levy payable, whichever is higher.

In the Federal Court Case of LEMBAGA PEMBANGUNAN INDUSTRI PEMBINAAN MALAYSIA V KONSORTIUM JGC CORP & ORS [2015] 6 MLJ 612, the Court held that it is well settled that the language of a statute imposing a tax, duty, charge or levy must be strictly construed, with no intendment permitted. Words must be given their ordinary meaning. Nothing is to be read in or implied and once that meaning is clear, due regard must be given to it. Any ambiguity must be decided in favour of the taxpayer charged. These general principles of interpreting a tax imposing statute are still woven into the fabric of the principles of construction of taxing provisions despite the introduction of Section 17A of the Interpretation Acts 1948 and 1967. 

The Federal Court was of the view that the consequential effect of the rapid economic growth in this country where mega projects and joint ventures by Malaysian based companies together with offshore entities are no more a rarity, makes it all the more imperative that the objective and purpose of the Act be implemented. This purposive and practical approach will surely assist and fulfil the task of the appellant, together with the levy mechanism, to manage, develop and regulate the construction industry tremendously.

Conclusion

Based on the above observation, it can be seen that offshore construction works falls under the purview of Section 34 of the Act and CIDB can impose levy accordingly. 

By Rahayu Partnership, Malaysia
Law Firm Website: www.rahayupartnership.com