Who is a Liquidator and What Do They Actually Do?

If your company is facing serious financial difficulties, you may have heard the term “liquidator” mentioned.

But what exactly does a liquidator do? And when might your business need one?

Let’s break it down in simple terms.

What is a Liquidator?

A liquidator is a licensed insolvency practitioner or the Official Receiver appointed to wind up a company’s affairs when it can no longer continue operating.

In this blog, the term liquidator refers to a licensed insolvency practitioner.

Think of a liquidator as someone who steps in to settle all of the company’s matters in an orderly and fair manner.

Under the Malaysian Companies Act 2016, liquidators must be qualified professionals who have obtained special licensing to handle company liquidations.

When is a Liquidator Appointed?

A liquidator is appointed when a company goes through a process called “winding up” or “liquidation.” This can happen in three main situations:

1. Members' Voluntary Liquidation

When a solvent company’s shareholders decide to close down the business (perhaps the owners want to retire or the company has fulfilled its purpose).

2. Creditors' Voluntary Liquidation

When an insolvent company’s directors realize the company cannot pay its debts and decide to wind up voluntarily.

3. Compulsory Liquidation

When the Court orders the company to wind up, usually after a creditor files a winding-up petition because the company owes them money.

What Does a Liquidator Actually Do?

The liquidator’s job is to wrap up the company’s affairs fairly and legally.

Here are their main responsibilities:

1. Take Control of Company Assets

Once appointed, the liquidator takes over management of the company from the directors.

They secure all company property, documents, and assets to prevent anything from going missing.

2. Investigate the Company's Affairs

The liquidator reviews the company’s financial records, transactions, and business dealings.

They look into what happened and whether everything was done properly.

3. Sell Company Assets

The liquidator sells off the company’s assets – this could include property, equipment, inventory, intellectual property, or anything else of value.

Their goal is to get the best possible price to maximize returns for creditors.

4. Collect Money Owed to the Company

If debtors or other parties owe money to the company, the liquidator will try to collect these debts.

5. Pay Creditors

Using the money raised from selling assets and collecting debts, the liquidator pays the company’s creditors in order of priority set by the law.

6. Investigate Director Conduct

The liquidator examines whether directors acted properly. If they find wrongdoing – such as fraudulent trading or moving company money just before insolvency – they can take legal action against the directors.

7. Finalize the Liquidation

Once everything is completed, the liquidator prepares final accounts, holds a final meeting, and applies to have the company officially dissolved.

Powers of a Liquidator

Access all company records and demand information from directors
Reverse certain transactions made before liquidation (if they were done to defraud the creditors)
Take legal action on behalf of the company
Sell company assets

Liquidator vs Administrator vs Receiver

It’s easy to get confused between different insolvency roles:

Liquidator: Winds up the company and distributes assets (the company will close)
Judicial Manager: Tries to rescue and rehabilitate the company (the company continues)
Receiver: Appointed by a secured creditor to recover their specific debt (doesn’t deal with all creditors)

Liquidator vs Administrator vs Receiver

Consider consulting an insolvency practitioner if your company:

Cannot pay debts when they fall due
Has received winding-up threats from creditors
Is facing legal action from multiple creditors

Getting early advice can sometimes open up options beyond liquidation, such as debt restructuring or judicial management.

The Bottom Line

A liquidator plays a crucial role in ensuring that when a company closes, everything is handled properly and fairly according to the law.

While having a liquidator appointed might seem like the end, it actually provides an orderly process that protects everyone involved and ensures that company affairs are concluded with transparency and accountability.

If you’re facing financial difficulties with your company, it’s always better to seek professional advice early. The sooner you understand your options, the more choices you’ll have available.

Get in touch with us for more info.

The cost of ‘not yet’ is always ‘too late’.