Company Series

May a debt against a company be recovered through winding up proceedings.

By Colin Pereira

Winding up proceedings against a company may be filed by any person owed more than RM500 by the company, on the grounds that the company is unable to pay its debt. 

However, the purpose of a winding up order is to place the assets of the company in the hands of the liquidator rather than as a mode of recovering a debt owed by the company. It is possible that the person who has applied to wind up the company may not recover the debt or fully recover as other creditors may have a claim on the company’s assets. 

Where a company is solvent and trading however, the mere possibility of  being wound up may induce it to pay its debts.

When is a company deemed insolvent

The prevailing view is that a company is insolvent and liable to be wound up if it is unable to meet its current liabilities. A company may not be able to avoid a winding up order being made against it even if its total assets exceed its liabilities.