A company unable to pay its debts following a valid statutory demand is deemed insolvent, and a winding up order may be granted even if the company claims commercial solvency, provided there is no bona fide dispute regarding the underlying debt.

Headnote:(A) Companies Act 2016 - Sections 465(1)(e) and 466(1)(a) - Winding up petition - Presumption of insolvency - The most important aspect of the winding up regime is that in the absence of a bona fide dispute of the debt, the failure to pay a valid statutory demand gives rise to a presumption of insolvency; this allows a winding up order to be made. (Para 12)

(B) Winding up proceedings - Requirement for judgment - A winding up is not an execution of a judgment, and as such, a judgment is unnecessary before a winding up order may be made. (Para 17)

(C) Without prejudice rule - Scope of application - Communications between parties regarding the mode and timing of payment in the absence of a live dispute do not constitute 'without prejudice' negotiations and are admissible. (Paras 18-19)

(D) Admission of debt - Impact on winding up - An unequivocal acknowledgment of a debt by the debtor, including an undertaking to settle the debt of a related entity, negates the existence of a bona fide dispute and justifies a winding up order. (Paras 20-22, 29) (E) Commercial solvency - Effect on winding up - A company claiming commercial solvency cannot defeat a winding up petition by simply refusing to pay a valid debt; refusal to pay following a valid statutory demand founds a basis for a winding up order. (Paras 35-37)

Facts of the case:
A petitioner initiated winding up proceedings against a respondent for failing to pay a substantial outstanding sum after the respondent acknowledged the debt in writing and undertook to settle the amount on behalf of a related entity. The respondent attempted to strike out the petition and argued that the debt was subject to a bona fide dispute and that the correspondence containing the admission was protected by the 'without prejudice' rule.

Findings of Court:
The court found that the debt was clearly documented, acknowledged, and undisputed at the time of the demand. The respondent failed to demonstrate that the debt was disputed on substantial grounds. The court rejected the respondent's reliance on the 'without prejudice' rule and found its evidence of solvency to be deficient/irrelevant to the underlying obligation to pay.

Issues: Whether the respondent's failure to pay constituted a ground for winding up despite claims of solvency, whether the admission of debt was validly made, and whether the petition was maintainable without a prior court judgment.

Ratio Decidendi: In the absence of a bona fide dispute on substantial grounds, a creditor is entitled to a winding up order ex debito justitiae upon proof of a valid statutory demand under the relevant corporate legislation. A debtor cannot avoid a winding up merely by asserting commercial solvency if they neglect to pay a validly demanded debt.

Result: Winding up petition granted with costs.

Table of Content
1. deprecation of striking-out applications in winding-up proceedings to prevent delay. (Para 1 , 2 , 3 , 4)
2. unequivocal acknowledgement of debt as an admission of liability. (Para 6 , 7 , 8 , 20 , 21 , 22 , 23 , 27)
3. statutory presumption of insolvency upon failure to satisfy a valid demand. (Para 9 , 10 , 11 , 12 , 13 , 14 , 15)
4. winding-up is not execution; 'without prejudice' rules do not apply to direct acknowledgements. (Para 16 , 17 , 18 , 19 , 24 , 25 , 26)
5. solvency is no excuse for refusing to pay an admitted debt. (Para 28 , 29 , 30 , 31 , 32 , 33 , 34 , 35)

JUDGMENT

Saheran Suhendran JC:

[1] These Grounds concern a Notice of Appeal to the Court of Appeal (encl 64) dated 15 December 2025 from a winding up order I made against the respondent pursuant to encl 1 as amended to encl 48 ("encl 1/48").

[2] Enclosure 1/48 was filed by the petitioner on the basis that the respondent failed to pay RM12,450,000.00 being the total sum due and owing by the respondent to the petitioner.

[3] The respondent also filed encl 7 to strike out encl 1/48.

[4] On numerous occasions I have stated, following the Court of Appeal in Maril-Rionebel (M) Sdn Bhd & Anor v. Perdana Merchant Bankers Bhd & other appeals [2001] 1 MLRA 270; [2001] 4 MLJ 187; [2001] 3 CLJ 248; [2001] 3 AMR 2893 at p 198D, that the practice of filing striking out applications in winding up applications should be deprecated as these interlocutories only serve to delay the hearing of the petition itself. This habit is as disruptive in judicial management and bankruptcy proceedings. Fortunately, as the Petition in encl 1/48 was ready for hearing, I heard that first before encl 7.

[5] All references to sections herein are with reference to the sections in the Companies Act 2016 ("CA 2016").

Introduction

[6] On 12 July 2017, Widad Hospitality Management Sdn Bhd ("Widad Hospitality") appointed the petitioner to carry out the Interior Works for the Residence ("UTM Residence Complex") of UTM Students ("the Works"), see exh GTC-1, encl 38. The contract price was RM28,000,000.00.

[7] The final amount due by Widad Hospitality for the UTM Residence Complex Works was stated to be RM21,571,938.69, see Statement of Account issued by the petitioner for sums due as at 31 January 2024 at encl 38 p 137.

[8] It is apparent that there were talks between the parties. After some interim payments, it appears that there was a balance due of RM12,450,000.00 ("the Outstanding Sum"). This was confirmed in a letter dated 12 April 2024 ("the Settlement Letter") from the respondent to the petitioner. By the Settlement Letter, the respondent acknowledged that Widad Hospitality owed the Outstanding Sum to the petitioner, see Annexure B at p 20 of encl 1/48. This is clear. However, on the true construction of the Settlement Letter, the petitioner also agreed to a proposed 'debt settlement' on behalf of Widad Hospitality which means a settlement of sums due by the respondent on behalf of Widad Hospitality (see at paras 20 to 22 below).

Petitioner's Winding Up

[9] On 14 January 2025, the petitioner was wound up pursuant to a winding-up Order dated 14 January 2025, made in Shah Alam High Court Companies (Winding-Up) Petition No.: WA-28NCC-500- 06/2024, see Annexure D of encl 1.

Respondent's Winding-up -Section 465(1)(e)

[10] The basis to wind up the respondent is set out in s 465(1)(e), which provides:

"(1) The Court may order the winding up if -...
(e) the company is unable to pay its debts;"

[11] Section 466(1)(a) defines 'inability to pay debts' thus:

"(1) A company shall be deemed to be unable to pay its debts if:
the company is indebted in a sum exceeding the amount as may be prescribed by the Minister and a creditor by assignment or otherwise has served a notice of demand, by himself or his agent, requiring the company to pay the sum due by leaving the notice at the registered office of the company, and the company has for twenty-one days after the service of the demand neglected to pay the sum or t

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2026 MarsdenLR 96400

HIGH COURT MALAYA KUALA LUMPURSAHERAN SUHENDRAN, JCVYNN VENTURE SDN BHD – AppellantVersusWIDAD BUSINESS GROUP SDN BHD – Respondent[Companies (Winding-Up) Petition No: WA-28NCC-403-04/2025]

A company unable to pay its debts following a valid statutory demand is deemed insolvent, and a winding up order may be granted even if the company claims commercial solvency, provided there is no bona fide dispute regarding the underlying debt.

HIGH COURT MALAYA KUALA LUMPUR
SAHERAN SUHENDRAN, JC
VYNN VENTURE SDN BHD – Appellant
Versus
WIDAD BUSINESS GROUP SDN BHD – Respondent
[Companies (Winding-Up) Petition No: WA-28NCC-403-04/2025]