Malaysian Company Law

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Initially, when a company is in the condition of winding up, section 176 and 177[1] would be helpful to overcome the financial difficulties that have been faced by the company. In another words, section 176 and 177 of the Companies Act 1965 will protect the company from liquidation. Therefore, certain rules and procedures need to comply with inorder to protect the company from the debts incurred.

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According to section 176(1) of the Act[2], where an application to the court should be made and the order should be granted for the arrangement of meeting that will be held between members and creditors. Meanwhile, the order to convene an arrangement of meeting also could be done by originating summons according to Rules of Court 2012[3]. It was enunciated in the case of Re Kuala Lumpur Industries Ltd[4] where, there is a requirement for the court to be satisfied whether there is or there would be a bona fide according to the application that has been made under section 176(1) of the Companies Act 1965. Furthermore, it is also not necessary that the proposal should originate from the company to the members and the creditors of the company since the proposal could originate from anybody. In furtherance of making an application under section 176 of the Companies Act 1965, it should be applied by the way of inter parte. It has been illustrated in the case of Re Foursea Construction (M) SdnBhd[5], that the ex parte will not be allowed and inter parte should take place. The purpose of inter parte is to avoid injustice that could be occurred towards the creditors of the company. Meanwhile, ex parte will only takes place when there is an exceptional rivalry occurs. For instance, in the case of PECD Bhd&Anor v Merino Odd SdnBhd&Ors[6], the ex parte application had been filed by the parties and inorder to make an ex parte application, the parties have the responsibility to disclose all the materials to the court. But, in the above case, the parties had failed to disclose the relevant subject matter to the court. Thus, the court had to set aside the application. As a general rule, ex parte application will not be allowed, however, the court has the discretion to approve the ex parte application if the parties comply with the requirements where there should be “frank and fair” disclose of the materials to the court. Apart from that, the court also will grant an order to convene a meeting between the company, members and the creditors that has been stated under section 176(1) of the Companies Act 1965. Based on the case of Re Price Mitchell Pte Ltd[7], the court has come into a conclusion that the issue on public policy,

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