Under the Companies Act 2016, Malaysian firms can use striking off as a cheap alternative to formal winding-up. To qualify, a company must be dormant, have no assets or liabilities, and lack outstanding tax or legal disputes. Reinstatement is possible within seven years.
To qualify for striking off under the Companies Act 2016, a company must satisfy a specific set of criteria intended to ensure the entity is truly dormant and free of obligations.
The core requirements to qualify for striking off are:
- Shareholders' Resolution: The shareholders must pass a resolution approving the striking off application on the basis that the company is not carrying on business or is not in operation. This resolution requires the consent of the majority shareholders; if a shareholder cannot be traced, proof of attempted contact via registered post must be submitted to the Companies Commission of Malaysia (SSM).
- No Assets and Liabilities: At the time of the application, the company must have zero assets and liabilities. This must be supported by the latest management accounts or the last audited financial statements lodged with the Registrar.
- No Outstanding Charges: There must be no outstanding charges registered against the company with the Registrar.
- No Outstanding Penalties or Compounds: The company must ensure all such liabilities are fully settled.
- No Outstanding Tax or Government Liabilities: The company must not have any outstanding tax or other liabilities with any Government Department or Agency. If operations had previously commenced, the company is required to settle all outstanding tax and obtain a tax clearance prior to filing.
- Updated Company Information: The details of the company's directors in the application must match the Registrar's records; any discrepancies must be updated before applying.
- No Ongoing Legal Proceedings: The company cannot be involved in any legal proceedings either within or outside of Malaysia.
- No Return of Capital: If the company still holds capital, it does not qualify for striking off and should instead proceed with a voluntary winding-up process to formally cease existence.
Special Requirements for Non-Operational Companies For companies that never commenced operations, the applicant must make a declaration confirming that no transaction has taken place since incorporation and that no bank account has been opened (or if one was opened, it has been closed).
Disqualifying Factors Even if a company seeks to apply, it does not qualify if it falls into any of the following categories:
- Companies that are still active in operation.
- Guarantor corporations.
- Holding companies.
- Companies involved in legal proceedings.
- Companies with outstanding liabilities (including unpaid taxes, loans, or penalties).
- Companies that have not filed annual returns or financial statements.
- Companies under investigation or enforcement action.
Based on the provided sources, the comparison between striking off and formal winding up for dormant companies focuses primarily on complexity, cost, and financial eligibility.
Here is the comparison:
1. Complexity and Cost
- Striking Off: This method is described as the "easy way" to close down a dormant company. It is considered a "simpler and more cost-effective alternative" to the formal winding-up process. It is designed to avoid the time and expense associated with formal winding up.
- Formal Winding Up: By contrast, this process is implied to be more costly, time-consuming, and procedurally complex,.
2. Assets and Liabilities
- Striking Off: This route is strictly for companies with a "clean exit," meaning they have zero assets and liabilities at the time of application. If a company has outstanding liabilities (taxes, loans, penalties), it does not qualify for striking off.
- Formal Winding Up: While the sources do not detail the full winding-up process, they explicitly state that if a company does not meet the strict zero-asset/liability criteria—specifically regarding capital—it must use the winding-up process instead.
3. Return of Capital
- Striking Off: A company cannot utilize this method if it still holds capital.
- Formal Winding Up: If a company still has capital, it is required to proceed with a voluntary winding-up process to formally cease its existence.
4. Eligibility and Scope
- Striking Off: This is an administrative alternative provided under the Companies Act 2016 specifically for companies that are no longer trading, have no intention to continue, and wish to eliminate recurring costs like audit fees and secretarial expenses. It is not available for guarantor corporations or holding companies.
- Formal Winding Up: This is the necessary route for companies that do not qualify for striking off, such as those that still hold capital or fall into disqualified categories like holding companies.
A company that has been struck off the register in Malaysia can be reinstated by applying to the Court under specific conditions.
Legal Basis and Eligibility Under Section 555 of the Companies Act 2016, "any aggrieved person" may apply to the Court to reinstate a company that has been struck off.
Time Limit The application for reinstatement must be made within seven (7) years from the date of the company's dissolution.
Criteria for Approval The Court will review the circumstances of the striking off. To grant a reinstatement, the Court must be satisfied that either:
- The company was carrying on business or in operation at the time it was struck off; or
- It is otherwise "just and equitable" to restore the company.
Effect of Reinstatement If the Court orders the reinstatement:
- The company is deemed to have continued in existence as if its name had never been struck off.
- Legal continuity is restored retrospectively.
- The company regains the legal capacity to initiate or defend legal proceedings, a right it loses upon being struck off.
Recent case law, specifically *Starza Corporation Sdn Bhd v KDTC Sdn Bhd & Ors *, supports the principle that legal continuity is restored retrospectively upon reinstatement.
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