A winding-up petition based on contested debts is inappropriate; only undisputed debts qualify a petitioner as a creditor under Section 218 of the Companies Act 1965.

[1] A winding up petition may be presented against a company on ground of its inability to pay its debt. It is a powerful weapon utilised to put pressure on the company to pay what is said by the petitioner to be a debt due and owing to it. The consequences are severe as winding up commences the moment a petition for it is presented against a respondent company. Consequences range from the respondent's bank freezing its account unless sufficient security is furnished for fear of preferential payments in the event the respondent is finally wound up. What is worse the bank may declare the respondent to be in default and recall its facilities from the respondent. Companies like the respondent in the construction business might be barred from tendering for projects as news of a winding up petition being presented against it would be known from the gazette and advertisement of the petition. Debtors upon knowing of a winding up petition being presented against its creditor might delay payment. Any application by the respondent for further credit facilities would most probably be denied.

[2] In this case the petitioner has presented a winding up petition against the respondent company for what is said to be a sum owing to it which cannot be disputed. Meanwhile the respondent has filed an application to strike out the petition.

Parties

[3] The petitioner was interested in entering into a joint venture with the respondent to bid for two projects. Amongst the terms of the joint venture are that a new company would be incorporated to undertake the job if awarded and that a sum of RM100,000.00 would be paid as a commitment fees for each project. Pending incorporation of the new company, all payments received by the respondent would be received for and on behalf of the new company.

[4] Konsep Setia Sdn Bhd was incorporated as the new company to handle one of the projects awarded.

Problem

[5] As the project was being carried out, around midway, the petitioner wanted to withdraw from the joint venture. It was agreed that the respondent shall buy over all the shares held by the petitioner for a sum of RM357,000.00 for all the advances and injection of funds into the joint venture company.

[6] According to the respondent, subsequent to the agreement reached on the sale of the shares in Konsep Setia Sdn Bhd, it was agreed that the petitioner shall buy over 300,000 shares in the respondent company from one shareholder by the name of Mr Chin Kok Peng and that the RM357,000.00 due and owing by the respondent to the petitioner shall be assigned to Mr Chin.

[7] The petitioner's version was that the sale of shares by Mr Chin to him was mutually aborted and that he did not receive the shares in the respondent company from the said Mr Chin. The petitioner also made reference to the fact that the shares transfer form (Form 32A) exhibited by the respondent in opposing the petition in exh NSW5 was neither stamped nor attested, let alone perfected.

[8] The petitioner through his solicitors issued a s 218 Notice under the Companies Act 1965 to the respondent demanding payment of the sum of RM657,000.00 within three weeks from the service of the notice, failing which the respondent shall be deemed to be unable to pay its debt and appropriate action