Qualifying as A Licensed Liquidator
by Lavinia Kumaraendran ~ 30 March 2020
Lavinia Kumaraendran (Partner)
Tel: 603-6201 5678 / Fax: 603-6203 5678
1. Statutory Framework
The role of a liquidator is one of great importance in Company Law, particularly in instances of Winding – Up where they are essentially tasked with dissolving an entire company. As such, the Companies Act 2016 (“CA 2016”) lays out several requirements before one can qualify as a liquidator. This is governed by Section 433(1) which in summary stipulates that in order for one to qualify as a liquidator, the said individual:
a. must be an approved liquidator;
b. cannot be more than RM 25,000.00 indebted to the company or a corporation related to the company;
c. cannot be an officer, partner or employer or employee of an officer, of the company;
d. cannot be assigning his estate for the benefit of his creditors or is in arrangement with his creditors under bankruptcy laws;
e. cannot be a bankrupt;
f. cannot be convicted of an offence involving fraud or dishonesty which is punishable on conviction by more than three (3) months of imprisonment.
In determining who may be an approved liquidator, Sections 433(3) & 433(4) clarifies that any member of a recognized professional body under Section 433(5) may apply to the Finance Minister to be acknowledged as an approved liquidator taking into consideration the experience and capacity of the person. The recent amendments to Section 433, particularly Section 433(4c), allows for the Finance Minister to delegate any or all of his powers to any person or body of persons. In line with this, the immediate past Finance Minister of Malaysia delegated such power to the Accountant General’s Department of Malaysia (“AGD”). In the AGD’s “Guidelines for Approval as a Liquidator” (the “Guidelines”) dated 21st January 2020, two (2) bodies were recognized as professional bodies under S433(5) of the CA 2016 namely:
a. the Malaysian Institute of Accountants (“MIA”); and
b. The Malaysian Institute of Certified Public Accountants (“MICPA”).
The recognition of the two abovementioned bodies as recognized professional bodies under S433(5) essentially means that only individuals that are part of these two professional bodies may qualify as a liquidator under S433 of the CA 2016. The AGD’s guidelines also imposed several requirements before an individual albeit part of the two abovementioned professional bodies may apply and become an approved liquidator under the CA 2016.
Amongst the other requirements in Section 433(1), the Guidelines impose the following additional requirements namely that the individual is a citizen or permanent resident of Malaysia and the individual has not been convicted of any offence involving the promotion, formation or the management of any corporation.
Additionally, the individual must also have at least five (5) years of collective working experience in the insolvency field. In this regard, experience prior to the individual being a member of the recognized professional bodies above is relevant. In the event an individual has the relevant experience but is no longer in the insolvency field, said individual may still become an approved liquidator provided:
- the individual has not left the insolvency field for more than three (3) years; or
- the individual returns to practice in the insolvency field for at least one (1) year before applying to become an approved liquidator.
1.2 Further Procedures
Subsequent to fulfilling the aforesaid requirements, the individual would undergo an interview with representatives from the MIA, Companies Commission of Malaysia (“CCM”), Securities Commission (“SC”) and the Malaysian Department of Insolvency (“MDI”).
Upon passing the interview and paying the prescribed fee, the individual would now be a liquidator, approved in principle. Consequently, paragraph 5.5 of the Guidelines stipulates two time-frames in which a liquidator must commence his practice in the field:
a. within six (6) months if the liquidator intends to start his own practice (either individually or jointly); or
b. within three (3) months if the liquidator intends to join an existing firm partner.
It is important to note that in the event that the liquidator starts his own joint practice or joins an existing firm, all the partners in the said firm have to be approved liquidators in principal for the former and approved liquidators under Section 433 of the CA 2016 for the latter. In this regard, it is especially crucial to take note of the various statutory procedures under the Registration of Business Act 1956 and the Limited Liability Partnership Act 2012. Following compliance with all the aforesaid requirements, the liquidator would then have to notify the registrar of his full approval as a liquidator under Section 433 of the CA 2016. Such notification should be done via a new form contained in Appendix 1 of CCM’s Circular 1/2020 dated 24 January 2020.
2. Comparison to the Companies Act 1965 (“CA 1965”)
Previously, under Section 8(3) of the CA 1965, in order for one to become an approved liquidator, he would first need to be an approved company auditor under Section 8(1) of the said act. The main difference between the qualification of a liquidator under the CA 1965 and the CA 2016 is that the CA 2016 does not impose any pre-requisite that the individual has to be an approved company auditor. Presently, under the CA 2016, approved company auditors and liquidator are kept separate by virtue of Sections 263 and 433. The rationale to this is perhaps that the framework around which liquidators are appointed should be in relation to their experience in liquidation related areas and not auditing as well.
As can be seen from the analysis above, although Section 433 of the CA 2016 lays out core requirements before one can become an approved liquidator, the bulk of the other qualifications and procedures is determined by the Finance Minister by virtue of Section 433(4) of the CA 2016. It is to be noted that the Guideline above was released by the AGD upon delegation by the then Finance Minister of Malaysia on the 21st January 2020, prior to the recent political upheaval in Malaysia. Therefore, such Guidelines may still be possibly altered if the current Finance Minister deems it necessary.