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Winding up a dormant company will entail much time and expenses. An easier way is to get it struck off the register of companies.

THERE are instances when a company is incorporated for the greatest and grandest ideas. However, there are times when these greatest and grandest ideas do not materialise and the company is left dormant.

Even if the company does not conduct any business or any transactions, its directors still have certain statutory duties to fulfil which includes filing the annual returns, and keeping proper accounts of the company.

Failure to do so is an offence and can carry an imprisonment term and/or a fine.

There are a few ways to “close down” a company, the most common being to wind it up. However, this incurs costs and may take some time to complete. But there is a cheaper, easier and faster way.

Directors and/or shareholders can apply to the Companies Commission of Malaysia (CCM) to request the registrar to exercise his powers under Section 308 of the Companies Act 1965 (CA) to strike off the company.

This section also allows the registrar to exercise his discretion to strike off a company if he has reasonable cause to believe that the company is not carrying on business or is not in operation.

In an application to strike off a company, the following need to be complied with:

(a) Resolution of the shareholders;

(b) The company has no assets or liabilities at the time when the application is made;

(c) The company has no outstanding charges in the Registrar of Charges;

(d) The company has no outstanding penalties or offer of compounds under the CA;

(e) The company has no outstanding tax or other liabilities with any government department or agency;

(f) The information of the company with the registrar is up to date;

(g) The company is not involved in any legal proceeding within or outside of Malaysia;

(h) The company has not made any return of capital to its shareholders;

(i) The company is not a holding company or subsidiary of another corporate body; and,

(j) The company is not a Guarantor Corporation.

It is important for the applicant who wishes to strike off a company to ensure that all of the requirements are fulfilled before submitting his application.

The necessary supporting documents must also be submitted together with the application.

An application under Section 308 of the CA involves a fee of only RM120. This sum is refundable if the applicant writes to the registrar to withdraw his application to strike off. This is a small sum to pay when compared with the costs involved in winding up a company, which include legal fees and filing fee for the winding up petition.

Once the registrar is satisfied that all requirements have been met, the striking off exercise is effected through the issuance of letters and notices to the company and the publication of a notice in the Gazette stating that the company has been struck off the ROC.

Recently, the CCM launched a number of initiatives to encourage applications to strike off companies which are dormant. Among them:

> To allow applications from dormant subsidiaries to be struck off from the ROC;

> Waiver or reduction of compounds earlier issued by CCM;

> The re-introduction of the moratorium period from April 1 to Sept 31, 2009, where the CCM has dispensed the requirement to submit the company’s management account and shareholders’ resolution in support of an application to strike off the company from the ROC; and,

> The extension of moratorium period from Oct 1 to Dec 31, 2009.

Even when a company is not operating any business, there are administrative charges involved, e.g. preparation and filing of annual returns.

More importantly, its directors should be aware that notwithstanding that the company does not carry out any operations, the directors’ duties under the law still exist.

This effectively means that the directors can be subjected to any action taken by the CCM by reason of their failure to fulfil their directors’ duties.

Directors and shareholders are encouraged to consider this option should they want to wind up companies that are dormant.

The application to strike off a company from the ROC is relatively straight-forward and can be completed much faster than the process of winding up.

> The writer is a young lawyer. Putik Lada, or pepper buds in Malay, captures the spirit and intention of this column – a platform for young lawyers to articulate their views and aspirations about the law, justice and a civil society. For more information about the young lawyers, please visit www.malaysianbar.org.my/nylc.