Learn more about how to start a business / company in Malaysia and how to operate it properly under the laws of Malaysia. If you're starting up new, the articles are very useful for new business owners too.
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The share capital of a company is the only security on which creditors rely. So, any reduction of share capital diminishes the fund out of which they are to be paid. As a result, companies with shares are not allowed to reduce the capital frequently.
In the event where the constitution does not authorize the reduction of capital, then the procedure for amending the constitution shall first be carried out.
Reduced share capital process is complicated, especially if company have any debts/liabilities, party involved:
A. Pass a special resolution and confirmation by the Court (Section 116)
B. Pass a special resolution supported by a solvency statement (Section 117)
In simple words, your company is solvent, no issue to pay the debts/ liabilities when is due within 12 months.
the assets of the company exceed the liabilities of the company at the date of the transaction.
Director making the statement has to declare that he has formed the opinion that the company satisfies the solvency test.
If the solvency statement is false or not believed by a director making the statement to be true, such director, shall on conviction, be liable to imprisonment for a term not exceeding five years or to a fine not exceeding RM3 million or to both.
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