Very often, clients are also interested to know if there’s any option to close a Labuan company, in addition on how to incorporate a Labuan company. Knowing there are such options available under the law may be useful when it comes to a time where you decide you don’t need your Labuan company any longer.
There are several ways to close a Labuan company, from striking off for not paying annual fees to the most formal winding up procedure where it involves the appointment of an approved liquidator, and the winding up process can be lengthy.
Here, we explore the two common options to close a Labuan company. These options are practical when you’re looking to close your Labuan company with a clean record and quicker exit from Labuan. Do take note that there’s a pre-condition to meet for both options where the Labuan company must be solvent.
(1) STRIKING OFF ACTION BY RESIGNATION OF THE RESIDENT SECRETARY
Labuan company can opt to strike its name off from the register with the resignation of resident secretary. The act of resignation effectively marks, and if there is no replacement within 1 month from the date the resident secretary’s resignation, the company to be struck off by Labuan FSA.
For this option, the Labuan company will still need to –
prepare final accounts and file its tax return up to the date of its ceasing business activity;
pay any staff their final salary and close their employment files;
distribute any business assets between the members;
as part of board resolution, minute that the company has paid or will pay all of its outstanding debts or other obligations; and
close all company bank accounts.
When will the company be struck off the register?
If there is no reason to do otherwise, Labuan FSA will strike off the company 1 month from the date of resident secretary’s resignation. The company shall be deemed to have been dissolved if the company remains struck off continuously for a period of 18 months.
Effect of striking off
Please note however, where the company has been struck-off, it shall remain responsible as a body corporate for all its claims, liabilities and obligations. Striking off does not absolve the company, its members, directors and officers of their liabilities and obligations. The company and its directors, members, liquidators and receivers may not legally commence or defend any legal proceedings, carry on any business or in any way deal with the assets of the company, make any claim or claim any right in the name of the company, or act any way with respect to the affairs of the company unless it is restored to good order.
Further, striking off does not mean that all books and records (including all the accounting records) related to the company can be destroyed or deleted i.e., they must be retained for at least 6 years at the company’s registered office in Labuan.
(2) ALTERNATIVE PROCEDURE FOR VOLUNTARY WINDING UP
Where a Labuan company has ceased to operate and has discharged all its debts and liabilities, client can opt to dissolve the company via voluntary winding up. Process includes, among others, making an application to Labuan FSA, obtain a written notice of no objection from Inland Revenue Board (“IRB”) and publish the company’s intention for dissolution in newspapers.
For this option, the Labuan company will still need to –
prepare final accounts and file its tax return up to the date of its ceasing business activity;
pay any staff their final salary and close their employment files;
distribute any business assets between the members;
as part of board resolution, minute that the company has paid or will pay all of its outstanding debts or other obligations; and
close all company bank accounts.
Documents to be prepared/applied for filing purposes, are as follows –
director’s resolution and member’s special resolution;
notice of declaration of dissolution to be advertised in 1 local newspaper and 1 international financial newspaper;
notice of declaration of dissolution (by registered post) to be sent to each director and member;
statutory declaration made by a director/member;
application letter addressed to IRB to obtain written notice it has no objection with the dissolution (certificate of tax clearance will be issued by IRB);
preparation of Form 44;
letter addressed to Labuan FSA to formally request to publish notice of dissolution in 1 local newspaper and 1 international financial newspaper;
and any other documents as may be required in connection with the dissolution process.
When will the company be dissolved?
The entire process of voluntary winding up of a Labuan company usually takes about 6 to 8 months. The company is considered dissolved the moment Labuan FSA approves the application and the Certificate of Dissolution is issued by them.
What can happen within 6 years from the date of the notice of dissolution was published?
There is a window of 6 years period i.e., from the date of the dissolution notice was published where before expiration, any person (this includes Labuan FSA and the tax authority) on application to the Court, and if the Court is satisfied that the Labuan company, at the time of dissolution it was in operation or it had not discharged all its debts and liabilities, the Court may direct the dissolution to be revoked and order it to be reinstated to the register.
Contact us for more information and our fees for options to close a Labuan company.
Please note that this write-up is not an international tax, legal or accounting advice. Readers should consult own tax, legal and accounting advisors before engaging us. This write-up has been prepared for informational purposes only and is not to be relied upon as a professional opinion whatsoever.