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erictan26
15-01-2009, 12:58 PM
Hi,

My sister and her friend have form a 2 dollar Sdn Bhd to start a retail business in a mall. Have been 2 years and the mall is running on 20% occupancy rate. Many stores just close down the shop without notify the management. My sister and her partner do consider close down also since management refuse to reduce the rent. Just some legal matter need some advice on it.

1) if they just close down without notify the management and at the same time winding up the company, does the management has the right to seek legal action to the directors?

2) what if they sell off the company at 2 dollar to Mr A, will be all the legal action ( if do have ) will only can taken against Mr A ?

3) for any changes of directorship, do they need to notify the management or this has nothing to do with management?


Another matter will be without any notice, can the management lock up the space overnight to force them pay up the outstanding? Or else they will unable to continue the business?

thanks for any comment.....

CS Chua
15-01-2009, 02:50 PM
Hi,

My sister and her friend have form a 2 dollar Sdn Bhd to start a retail business in a mall. Have been 2 years and the mall is running on 20% occupancy rate. Many stores just close down the shop without notify the management. My sister and her partner do consider close down also since management refuse to reduce the rent. Just some legal matter need some advice on it.

1) if they just close down without notify the management and at the same time winding up the company, does the management has the right to seek legal action to the directors?

2) what if they sell off the company at 2 dollar to Mr A, will be all the legal action ( if do have ) will only can taken against Mr A ?

3) for any changes of directorship, do they need to notify the management or this has nothing to do with management?


Another matter will be without any notice, can the management lock up the space overnight to force them pay up the outstanding? Or else they will unable to continue the business?

thanks for any comment.....
To my understanding:

1. Since it is a private limited, the directors are protected unless they are guarantors. The creditors can only go after the cash and assets of a Sdn Bhd but not the directors' personal wealth. This is why banks always ask the directors to be guarantors.
2. If the rental is signed under the company the creditors will go after the company only unless it is jointly signed. So, if Mr A buys the company, the mall will go after Mr A. As for the existing debts of the company, it is between Mr A and the seller. Mr A should be informed of the company's debts and obligations and if he so chooses to buy the company together with the existing debts and obligations, he will be responsible.
3. This depends on your rental agreement. Read it carefully. If it is not mentioned, I assumed it is not necessary since it is immaterial to the rental agreement. However if the signatory is changed, then, the management has to be informed.

All the above comments are without prejudice, of course. Since it is a Sdn Bhd, you will have a company secretary. Ask your company secretary since you have paid for his services. It is his job to advice you of matters like this.

trex92
15-01-2009, 05:13 PM
To my understanding:

1. Since it is a private limited, the directors are protected unless they are guarantors. The creditors can only go after the cash and assets of a Sdn Bhd but not the directors' personal wealth. This is why banks always ask the directors to be guarantors.
2. If the rental is signed under the company the creditors will go after the company only unless it is jointly signed. So, if Mr A buys the company, the mall will go after Mr A. As for the existing debts of the company, it is between Mr A and the seller. Mr A should be informed of the company's debts and obligations and if he so chooses to buy the company together with the existing debts and obligations, he will be responsible.
3. This depends on your rental agreement. Read it carefully. If it is not mentioned, I assumed it is not necessary since it is immaterial to the rental agreement. However if the signatory is changed, then, the management has to be informed.

All the above comments are without prejudice, of course. Since it is a Sdn Bhd, you will have a company secretary. Ask your company secretary since you have paid for his services. It is his job to advice you of matters like this.

Hi chua,

How are you? :D some further inputs:-

1. The courts does lift the veil of incorporation if it is proven that there is fraud, so in cases like this, a Sdn Bhd would not protect the directors/shareholders from legal action.

vaw
15-01-2009, 11:18 PM
Hi,

My sister and her friend have form a 2 dollar Sdn Bhd to start a retail business in a mall. Have been 2 years and the mall is running on 20% occupancy rate. Many stores just close down the shop without notify the management. My sister and her partner do consider close down also since management refuse to reduce the rent. Just some legal matter need some advice on it.

1) if they just close down without notify the management and at the same time winding up the company, does the management has the right to seek legal action to the directors?

2) what if they sell off the company at 2 dollar to Mr A, will be all the legal action ( if do have ) will only can taken against Mr A ?

3) for any changes of directorship, do they need to notify the management or this has nothing to do with management?


Another matter will be without any notice, can the management lock up the space overnight to force them pay up the outstanding? Or else they will unable to continue the business?

thanks for any comment.....

Just to add on,

1) I agree with trex on the first statement.

2) Assuming an agreement is reach with Mr. A (i.e - transfer of ownership via shares and cessation of directorship from the company) with the necessary legal documents, then your sister and her partner is relief from any legal recourse from the management after signing of the SPA.

However, do know the management still could get your sister and her partner to court for any actions (fraud, negligence and etc..) prior to the signing of the SPA.

3) Well it depends on the change of directorship. If assume that the shareholder and the director have changed then the answer is "yes". A change in directorship (the person whom signed the rental agreement) then the answer is "yes". A change in directorship (the person did not signed the rental agreement) then the answer is "no".

4) The management must give adequate legal notification in regards to locking up a premise. Otherwise, it is illegal for them to lock up the premise.

By the way, this is my personal opinion only. Do seek professional advise in regards to the matter above.

erictan26
16-01-2009, 01:37 AM
just something to add on....

what if the company is lack of fund and facing cash flow problem as none of the director willing to pump in anymore capital,in this case, the only way will be winding up the company. Will this consider fraud case???

trex92
16-01-2009, 10:49 AM
just something to add on....

what if the company is lack of fund and facing cash flow problem as none of the director willing to pump in anymore capital,in this case, the only way will be winding up the company. Will this consider fraud case???

Nope, winding up due to going concern is not fraud... but the process is very very lengthy and difficult but still possible...