Vesting Powers Of Liquidators In Selling Off Company’s Land

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Must a company land be vested in the hands of the liquidator before the liquidator can sell off the land? This issue was dealt with in the case of Provisional Liquidator Maril-Rionebel (M) Sdn Bhd (formerly known as Kredin Sdn Bhd) v Anafartal Caddesi Sdn Bhd1– we will briefly discuss it today.

Brief facts of the case

Maril-Rionebel (M) Sdn Bhd was wound up. A liquidator was appointed to manage the company’s assets i.e. realize the company’s assets. In the process of doing so, the liquidator wanted to sell 5 lands that were owned by the company to another company known as Karisma Saujana Sdn Bhd for the sum of RM100 Million. However, it was discovered that Anafartal (one of Maril-Rionebel shareholders) have entered private caveats in the said lands, therefore preventing the relevant parties from completing the sale of the 5 lands.

The parties contention

The liquidator contended that:

  1. He had the powers to sell the companies land under Section 236 (2) of the Companies Act2; and
  2. He, representing the Company, has the right to apply to the court for the removal of the private caveat under Section 327 of the National Land Code3, as they are “aggrieved” by Anarfatal’s decision to enter private caveats on those lands.

Anafartal contended otherwise, claiming that the liquidator cannot represent the company since he had yet to submit an application to the court under Section 233 of the Act to have the property vested under the custody of the liquidator. In short, until the liquidator is sanctioned by the vesting order of the winding-up court, the liquidator is not a body aggrieved nor is the liquidator clothed with the requisite locus standi to make the application to remove the private caveats.

The court’s decision

The High Court sided with the liquidator.

The court’s rationale

  1. The aim of winding up a solvent company is usually to allow the shareholders, who decide that the company has fulfilled the purposes for which it was first established, to have the assets distributed equally among themselves after paying out the creditors.

    If a company is insolvent, the purpose of winding it up is to provide a procedure that allows for an equitable and fair distribution of the assets of the insolvent company amongst its creditors equally.

    Because the purpose of a winding-up is to distribute the company’s assets to creditors and contributories, the liquidator is under a duty to realise the company’s assets. To this end, the liquidator is given powers to sell all the company’s property and to execute documents in its name under Section 236 (2) of the Act to ensure that the desired outcome mentioned above is achievable.
  2. Section 236 (2)(a) of the Act permits the liquidator to ‘bring or defend any action or other legal proceeding in the name and on behalf of the company’. It must be borne in mind that the applicant as the Official Receiver and Liquidator of the company in liquidation has entered into a sale and purchase agreement with the purchaser for the sale of the said lands and the applicant is bound contractually to deliver the said lands to the purchaser free from encumbrances. This effectively means that:
    1. the liquidator has the right to deal with the said lands pursuant to Section 327 of the Code; and
    2. Since the private caveats entered by the Anafartal prevents the liquidator from fulfilling its contractual obligations, the liquidator must be construed as a ‘body aggrieved’ (on behalf of the company) in order to entitle it to remove the private caveats.
  3. To adopt Anafartal’s argument pertaining to Section 233 of the Act would simply mean that the liquidator must first vest the said lands in its own name before the liquidator can be said to have locus standi to make the application for removal of private caveats. This proposition would run afoul of the very statutory provision (Section 236 (2)(a) of the Act) that clothes the liquidator with the requisite locus standi to make this very application. Effectively, Section 236 (2)(a) of the Act does away with any argument that revolves around locus standi.

    Secondly, the intention of Section 233 Act is to impose a statutory duty on the liquidator to ‘take into his custody and under his control all the property or choses in action to which the company is or appears to be entitled’. Section 233(2) of Act 1965 also states that the liquidator may even bring or defend any action or legal proceedings for the purposes of effectually winding up the company and recovering its property. This very power to bring or defend legal proceedings must be confined to the objective as set out in Section 233(1) of the Act. It is a power to be exercised with the sole intention of taking custody and control of assets held by other parties or third parties but beneficially belonging to the company in liquidation.

    Thus, it is important to distinguish the two powers of commencing and defending legal proceedings. The powers given to the liquidator under Section 236(2)(a) of the Act is general power whereas the powers given under Section 233(2) of the Act is for a specific purpose. It is clear as crystal that the very purpose of Section 233 of the Act is to essentially gather all the assets, landed or otherwise, for the purposes of putting them in the hands of the liquidator. Here, the said lands are already registered in the name of the company in liquidation and therefore there is no need to vest the said lands or to put the said lands in the custody and control of the liquidator as it is already in the custody and control of the liquidator.

In short, unless the land has not been registered in the name of the company in liquidation, the liquidator does not need to apply for the land to be vested in his name.

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1. [2006] 4 MLJ 1.

2. 1965 (currently, section 472 and 12th Schedule of the Companies Act 2016).

3. 1965 (currently, section 483 of the Companies Act 2016).