1. Winding-up petition founded on judgment debt — Application to set aside order and stay liquidation — Defective service and director’s standing. (Para 1 , 2 , 3 )
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2026 MarsdenLR 1487
HIGH COURT SABAH & SARAWAK TAWAU
STEVE RITIKOS, JC
RE: SWAN CONSTRUCTIONS (M) SDN BHD
[Post-Winding Up Suit No: TWU-28PW-11-12/2025(HC) (Original Winding Up No: TWU-28NCC-9-8/2025)]
Petitioner Advocates:Mervyn @ Hasan Sainy ,Respondent Advocate: Mohd Nazlee Zubair
Legal Category Hierarchy
-
company law
-
winding up
- winding-up order
- winding-up petition
-
insolvency
- presumption of insolvency (Para 21)
- liquidation
-
winding up
- practice and procedure
Table of Contents
2. Applicant alleged defective service and special circumstances; petitioner objected that director lacked post-winding-up standing to sue. (Para 4 , 5 , 11 , 13 , 19 )
3. Court found director lacked standing, service was effective despite omission, and solvency claims did not rebut unpaid judgment debt. (Para 6 , 9 , 10 , 12 , 16 , 17 , 20 , 22 )
4. Directors are functus officio after winding up absent liquidator’s sanction; service affidavit omission is directory; unpaid judgment debt triggers insolvency, barring stay absent special circumstances. (Para 7 , 8 , 14 , 15 , 18 , 21 )
5. Application dismissed with costs; requests to set aside and stay refused. (Para 23 , 24 )
6. Does a company director have standing to commence proceedings on behalf of the company after a winding-up order is made?
No. After a winding-up order, directors become functus officio; only the liquidator or Official Receiver may bring or defend proceedings in the company’s name unless prior sanction is obtained or the director acts as a contributory. (Para 5 , 6 , 7 , 8 , 9 , 10 )
7. Is a winding-up order void where the affidavit of service omitted the statutory phrase about absence of company officers?
No. The statutory phrase is directory, not mandatory; service remains valid if notice was actually conveyed and no substantial injustice resulted, and an unnotified change of address cannot defeat service. (Para 11 , 12 , 13 , 14 , 15 , 16 , 17 )
8. Can a stay of winding up be granted merely because the company is solvent, active, and has receivables?
No. A conscious refusal or neglect to pay an undisputed judgment debt triggers the statutory presumption of insolvency; the applicant must prove positive special circumstances, which solvency assertions alone do not establish. (Para 18 , 19 , 20 , 21 , 22 )
9. Is the Official Receiver’s no-objection statement binding on the court in a stay application?
No. The court retains exclusive discretion to assess the objective merits of a stay; a bare statement of no objection cannot fetter or supersede that discretion. (Para 22 )
JUDGMENT
Introduction
[1] This is an application by the applicant, Swan Constructions (M) Sdn Bhd ("the applicant"), via Enclosure 1, praying for an order to set aside the winding up order made against it on 20 November 2025. Concurrently, the applicant seeks to strike out the winding up petition presented on 27 August 2025 by Small Medium Enterprise Development Bank Malaysia Berhad ("the petitioner"), to validate any disposition of property after the presentation of the Petition, and to stay the execution of the winding up order pending the final disposal of this application. The application is premised upon O 18 r 19, O 42 r 13, and O 92 r 4 of the Rules of Court 2012, alongside the inherent jurisdiction of this Court.
Factual Background
[2] The dispute stems from a financing banking facility granted by the petitioner to the applicant. Following an alleged default, the petitioner obtained a judgment in default of appearance against the applicant on 26 February 2025 for the sum of RM401,877.46. Premised on this judgment debt, the petitioner's advocates, Messrs. Zainal & Associates, presented a winding up petition dated 27 August 2025.
[3] The Applicant asserts that it only became aware of the petition hearing on 19 November 2025 - the day prior to the scheduled hearing - after being personally informed by a representative of the petitioner. On 20 November 2025, the applicant's director attended the open Court proceedings before this Court, wherein the winding up order was officially granted and recorded.
[4] The Applicant subsequently filed the present application, raising two central arguments: first, that the winding up order is defective and must be set aside as of right due to bad service of the Petition under r 25(1) of the Companies (Winding-Up) Rules 1972; and second, that special circumstances exist to warrant a stay of the winding up under s 243 of the Companies Act 2016, as the company is active, solvent, and possesses substantial receivables. The Petitioner raised a preliminary objection, contending that the director lacked the legal standing to depose affidavits or initiate these proceedings post-winding up.
Issue 1: The Director's Legal Standing (Functus Officio) To File Affidavits Post-Winding Up
[5] Before addressing the substantive merits of Enclosure 1, this Court must first determine the critical threshold issue regarding the legal standing (locus standi) of the applicant's director to depose affidavits and initiate these proceedings post-winding up. The Petitioner strongly contends that upon the making of the winding up order on 20 November 2025, the company's directors became functus officio. Consequently, they lack the residual legal capacity to act or execute documents on behalf of the company without mandatory prior sanction.
[6] The statutory scheme of the Companies Act 2016 dictates that once a winding up order is granted, the management and control of the company's affairs vest exclusively in the liquidator or the Official Receiver. The primary executive powers of the board of directors are systematically extinguished.
[7] The position in Malaysia is well-settled. Upon the crystallization of a winding up order, directors lose their operational status and cannot independently initiate legal actions in the company's name. In Kimlin Housing Development Sdn Bhd v. Bank Bumiputra Malaysia Bhd & Ors [1997] 1 MLRA 267; [1997] 2 MLJ 805; [1997] 3 CLJ 274; [1997] 3 AMR 2361, the Federal Court established that winding up strips directors of their powers to control, manage, or represent the corporate entity. Upon the appointment of a liquidator, all powers of the directors cease, except as sanctioned by the company in general meeting with the liquidator's consent, or by the liquidator (see s 445 Companies Act 2016). Any residual powers left to directors are strictly limited and do not extend to maintaining or defending substantive legal actions in the name of the company without the explicit sanction of
