Closing down your business? Here's what you need to know

Closing down a company is a significant decision that can arise from various circumstances: the business is no longer viable, restructuring has rendered it redundant, or it has served its purpose. In Malaysia, companies can be voluntarily dissolved under the Companies Act 2016 through two primary methods: Striking Off and Members' Voluntary Liquidation (MVL).

Striking Off represents an efficient and expedient approach to dissolving a company, generally requiring approximately six months to complete. To qualify for this procedure, several prerequisites must be satisfied: the company must have ceased operations or business activities, possess neither assets nor liabilities and secure the consent of its shareholders. Additionally, the application is contingent upon approval by the regulatory authority, Suruhanjaya Syarikat Malaysia (SSM).

Upon successful application, the company’s name will be published in the Gazette notice, signifying its dissolution. The company’s books and records are then required to be retained for at least seven years post-dissolution and it is possible for reinstatement under the court's power during the seven years. However, if SSM rejects the application, the company may still wind down via liquidation.

Members' Voluntary Liquidation (MVL) is another avenue to dissolve a solvent company. The company’s members, also known as the shareholders, shall appoint a liquidator to wind up its affairs. This process could take up to a year or more, depending on the receipt of tax clearance from the Malaysian Inland Revenue Board.

In MVL, the company will be dissolved within three months after holding the final meeting, where any remaining assets will be distributed and the company’s closure is officiated. Unlike Striking Off, the books and records can be retained or destroyed at the members' discretion, and reinstatement is not possible.

1. ‘Striking Off is always faster and easier’ 

While it is true that Striking Off is generally quicker compared to MVL, the process is not always straightforward. It requires the company to meet specific conditions imposed by the SSM. If these conditions are not met, Striking Off can be delayed or even rejected by the SSM, necessitating a shift to liquidation. 

2. ‘Striking Off eliminates all future liabilities and responsibilities’ 

Many believe that once a company is struck off, all future liabilities and responsibilities are annulled. This is false. A struck off company can be reinstated by the court within seven years and potentially reactivate any liabilities. Additionally, failure to retain company records for seven years could lead to penalties and complications.

3. ‘MVL is only for large companies and is overly complicated’ 

MVL can be appropriate for any solvent company, regardless of its size. While MVL does involve more steps than Striking Off, the process is designed to be thorough, involving a liquidator to wind down affairs systematically. This ensures that all assets and liabilities are properly managed and distributed.

4. ‘MVL guarantees immediate dissolution’ 

MVL is often thought to result in immediate dissolution once the liquidation process begins. In reality, MVL can take up to a year or more, primarily due to the requirement for tax clearance from the Malaysian Inland Revenue Board.

1. Consultation with company secretary

A good starting point is to conduct a thorough review of the company’s statutory compliance. Ensure all annual compliances are fulfilled and that there are no outstanding liabilities, especially with the regulators. It’s vital to also verify if the company is able to satisfy the solvency test.

2. Cash flow management

Address questions around fund distribution. Determine if funds can be distributed before, during or after closing down. Assess the company’s balance and decide if a cash injection or repatriation is necessary. Following the tabling of the 2025 Malaysian Budget, the distribution of dividends to individuals may now be subject to tax. Therefore, staying informed about these changes and ensuring that all distributions are managed in accordance with the latest tax regulations is crucial. Additionally, it may be worthwhile to explore alternative methods of fund distribution to maximise tax efficiency. Engaging a tax advisor can provide valuable insights into various strategies that could help optimise your financial planning and minimise tax liabilities.

3. Maintaining a registered office

All books and records of the company should be maintained at the registered office in Malaysia even during the dissolution process. This office will be the primary address where the SSM and other regulators would direct their communications to and source for secretarial records of the company. 

4. Roles of liquidator and company secretary

When closing down, many stakeholders would be involved, including the regulators and third parties such as bankers, tax agents and auditors. The liquidator (for MVL) and the company secretary (for Striking Off) play crucial roles as the liaison with regulators and ensuring timely responses to any queries.

5. Process and approvals

Both methods require directors' and/or members' approvals and there are notifications to be made with the stakeholders including the regulators. Having the right guidance can efficiently schedule and monitor the entire dissolution process, ensuring a smooth and stress-free closure. This way, potential delays and unwanted costs can be avoided.

Dissolving a company, whether through Striking Off or MVL, involves meticulous planning and compliance with regulatory requirements. By understanding the nuances of each method, you can choose the most suitable route for your company.

Need further insights? Speak to us now, and let us guide you through this process efficiently and effectively.

Did you find this blog helpful? Yes | No