Only a liquidator, creditor, or contributory can apply for a stay of winding up under Section 492 of the Companies Act 2016; other parties lack standing.

(Application To Stay The Winding Up)

Prelusion

[1] A Court Order dated 3 May 2019 wound up Shailo Cold Storages Sdn Bhd (Shailo). The petitioning creditor in the winding up petition was Maybank Islamic Berhad (Maybank Islamic). The Official Receiver (OR) was appointed as Shailo's liquidator.

[2] Shailo now applies under s 492 of the Companies Act 2016 ( CA ) for a stay of the winding up (Application). Shailo cites Maybank Islamic as the Respondent.

[3] The Application raises the following issues:

(1) Who can apply for a stay under s 492?

(2) What proceeding is stayed by a s 492 stay Order?

(3) What is the effect of a s 492 stay Order?

The Grounds For This Application

[4] Foremost, it is pertinent to note that Shailo is the applicant. And Shailo made Maybank Islamic the respondent.

[5] The grounds for this Application are rather sketchy. Shailo states that these are the grounds to support the Application:

(1) Shailo, as the applicant, has paid RM67,300.00 to the Jabatan Insolvensi Malaysia (Insolvency Department), for the Insolvency Department to in turn pay Maybank Islamic.

(2) Shailo, as the applicant, has agreed to sell its property to pay off the debts owed to these creditors—the Lembaga Hasil Dalam Negeri (LHDN) and Lee Frozen Food Sdn Bhd (Lee Frozen Food).

(3) Maybank Islamic, the LHDN and Lee Frozen Food consent to this Application.

The Terms Of Section 492

[6] It is pivotal to set out the terms of s 492 of the CA :

Section 492. Power of Court to stay winding up

(1) At any time after an order for winding up has been made, the Court may,on the application of the liquidator or of any creditor or contributory and on proof to the satisfaction of the Court that all proceedings in relation to the winding up of the company ought to be stayed, make an order staying the winding up of the company for a specified time on such terms and conditions as the Court thinks fit.

(2) Where the Court makes an order under subsection (1), the liquidator shall cease to conduct any further action on behalf of the company from the date of such order.

[Emphasis Mine]

Who Can Apply For A Section 492 Stay Order?

[7] Only three parties can apply for a s 492 stay Order:

(1) the liquidator, who is the OR in this winding up;

(2) a creditor; and

(3) a contributory.

[8] And as applicant for a s 492 stay Order, they have to satisfy this Court that all the proceedings that relate to Shailo's winding up "ought to be stayed"‌.

What Proceeding Is Stayed By A Section 492 Stay Order?

[9] Here, the proceeding sought to be stayed is the liquidation process that is underway as a result of the winding up Order.

[10] In fact, if and when a s 492 stay Order is made, the OR, as liquidator, must stop from doing any act on behalf of the wound up company: Shailo. The OR must stop any liquidation activity, any liquidation step, or any liquidation exercise.

[11] For instance, the OR, as liquidator, must not enter into any contracts, must not perform any transactions, and cannot make any payments on behalf of Shailo.

What Is The Effect Of A Section 492 Stay Order On Shailo (The Company That Is Wound Up)?

[12] If a s 492 stay Order is made, can the wound up company: Shailo, who is in liquidation, continue to do business, continue to perform transactions, or enter into contracts?

[13] The answer is yes. A s 492 stay Order puts a stop to the winding up Order, and the wound up company can resume to do business—American International Assurance Bhd v. Coordinated Services L Design Sdn Bhd ; .

[14] In American International Assurance (supra), the Court Of Appeal held:

[19] The effect of an order staying winding up proceedings is that the winding up o