7 Common Mistakes Foreign Companies Make When Closing Down in Malaysia

Shutting down a company in Malaysia may seem straightforward – but for foreign investors, the process can become unexpectedly complex. While Malaysia’s corporate legal framework is clear and well-developed, international businesses often overlook key local requirements when exiting the market. The result? Avoidable delays, compliance risks, and increased costs.

This article is a follow-up to our Comprehensive Guide on Winding Up Solvent Companies in Malaysia. Below, we highlight the seven most common mistakes foreign-owned companies make when closing down – and how to avoid them.

Mistake 1: Confusing voluntary winding up with striking off

Many foreign investors assume that ceasing business operations and applying to strike off the company is sufficient. However, striking off is only appropriate when a company has no assets or liabilities. If there are remaining assets, debts to settle, or a need to formally close books, the correct approach is a members’ voluntary winding up. Using the wrong method can trigger tax issues, audit red flags, and legal disputes.

Mistake 2: Assuming home country rules apply

It’s common for directors and shareholders to follow procedures from their home jurisdictions – but Malaysia’s Companies Act 2016 imposes strict requirements and timelines. Failure to comply with local formalities – such as proper shareholder resolutions and statutory filings – can invalidate parts of the winding-up process and delay closure.

Mistake 3: Neglecting tax clearance

While tax clearance from the Inland Revenue Board (LHDN) is not legally mandatory, it is strongly recommended in practice. Without it, a liquidator may be unwilling to release remaining funds or complete the liquidation. Worse, unresolved tax matters could result in liability for directors or holding companies, particularly in group structures.

Mistake 4: Ignoring employee entitlements

Even in a solvent winding up, employee claims take priority. This includes unpaid salaries, unused annual leave, statutory contributions to EPF, SOCSO and EIS and any termination benefits. Foreign companies that have already wound down local HR operations may inadvertently neglect these obligations – leading to reputational damage, enforcement action, or civil claims.

Mistake 5: Improperly closing bank accounts

Foreign companies often rush to shut down local bank accounts – only to find they are still needed for the liquidation process. Bank accounts should remain open until the liquidator has fully settled debts, received tax clearance and returned surplus funds. Premature closure can obstruct payments, tax refunds and asset distribution.

Mistake 6: Appointing the wrong liquidator

Not all liquidators are created equal. Some companies appoint a liquidator solely based on cost or availability, without considering their cross-border experience, responsiveness, or communication capabilities. For companies with foreign shareholders, overseas assets, or multilingual documentation, a poor appointment can stall the process and lead to compliance risks.

Mistake 7: Not taking professional advice early

Malaysian winding-up procedures are procedural and deadline-driven. A single misstep can result in costly delays or necessitate redoing several steps. Engaging experienced local counsel at the outset ensures that compliance, timelines and strategic considerations are properly addressed – avoiding last-minute surprises or penalties.

Checklist: Winding Up a Foreign-Owned Company in Malaysia

✔ Confirm the company is solvent and qualifies for members’ voluntary winding up.
✔ Ensure directors can sign a statutory declaration of solvency.
✔ Pass a special resolution (75% approval) at a properly convened shareholders’ meeting.
✔ Appoint a licensed liquidator with cross-border experience.
✔ Maintain Malaysian bank accounts until liquidation is finalised.
✔ Obtain tax clearance from the Inland Revenue Board (recommended).
✔ Settle all outstanding employee entitlements and statutory contributions.
✔ File all required forms with the Companies Commission of Malaysia (SSM) and notify the Director General of Insolvency.
✔ Advertise the winding-up resolution in two newspapers (English and Bahasa Malaysia).
✔ Hold final meetings and complete all post-liquidation filings.

Foreign exits don’t need to be complicated – but they do need to be done right. We regularly assist foreign shareholders and group legal teams in navigating voluntary winding up processes in Malaysia. If you’re planning an exit, early legal advice can help you avoid delays and protect your interests.

Get Assistance from Experienced Winding-Up Advisors

Exiting the Malaysian market doesn’t have to be stressful – but it must be done right. At Aqran Vijandran, we regularly advise foreign shareholders, group legal teams and regional HQs on navigating voluntary winding-up processes in Malaysia. Whether you're planning ahead or dealing with a complex exit, we can help ensure the process is smooth, compliant, and cost-effective.

Contact us today for tailored advice and end-to-end support on winding up your Malaysian company.