Landmark Decision on appointment and scope of liquidator’s powers

24 November 2025

Landmark decision by the Federal Court on appointment of liquidator and the scope of Liquidator’s powers and liabilities

The Federal Court has on 12.11.2025 delivered a landmark decision in four (4) conjoined appeals arising from the liquidation of one London Biscuit Berhad (“LBB”). The judgement provides authoritative guidance on the scope of the liquidators’ powers and liabilities under the Companies Act 2016 and the extent to which creditors’ wishes must guide the court in the appointment of liquidator.

Our firm acted for the bank creditors who had obtained an Order for the appointment of Mr Lim San Peen (“LSP”) of Messrs. PricewaterhouseCoopers Advisory Services Sdn Bhd as the Interim Liquidator and thereafter the Liquidator of LBB when LBB was ordered to be wound up on 13.1.2020. In 2022, LSP obtained an Order for his release and discharge upon his retirement and for Victor Saw (“VS”) to be appointed as the Liquidator of LBB, backed by an overwhelming majority of creditors for VS’ appointment. On 30.10.2023, following an appeal filed by a minority creditor of LBB, the Court of Appeal set aside the Order for LSP’s release and discharge, granted leave to the said minority creditor to commence action against LSP and appointed one Gabriel Teo as the joint liquidator of LBB. It was held by the Court of Appeal, inter alia, that termination benefits and indemnity in lieu of notice was not entitled to priority under Section 527 of the Companies Act 2016 (“CA”).

On 24.6.2024, our clients obtained leave of the Federal Court to intervene in the proceedings relating to LBB’s application for leave to appeal against the Court of Appeal’s decision of 30.10.2023.

On 9.12.2024, leave to appeal was granted to LBB (LBB’s appeal on the role of creditors’ wishes in the appointment of joint liquidators), VS (VS’ appeal on the authority of joint liquidators where one is conflicted, which arose from VS’ applications filed subsequent to the Order of 30.10.2023 made by the Court of Appeal) and LSP (LSP’s appeals on whether termination benefits and indemnity in lieu of notice constitute costs and expenses of winding up, and whether payments made in good faith but breach of Section 527 of the CA can justify removal or proceedings against a liquidator) by the Federal Court.

On 12.11.2025, the appeals filed by LBB, VS and LSP were allowed with costs by the Federal Court where, inter alia, the Order of 30.10.2023 of the Court of Appeal was set aside. In its unanimous decision, the Federal Court held, inter alia, that:-

(a) Section 478 (2) of the CA expressly provides that the functions and powers of the liquidator may be performed and exercised by either one of the joint liquidators or by both of them. Accordingly, a non-conflicted liquidator may act independently without reference to or the concurrence of the conflicted joint liquidator.

(b) The Court must take into account the wishes of the majority of creditors and/or contributories in deciding on the appointment of an additional liquidator as joint liquidator and prior notice must be given to the creditors and contributories for them to be heard and/or to seek their views in that regard, where the mechanism as laid down in Section 521 of the CA should be resorted to.

(c) Where a liquidator has obtained the authority of the court to carry on business of the company, the “costs and expenses of winding up” under Section 527(1)(a) of the CA can include Termination Benefits and Indemnity in lieu of Notice payable to employees retained/continued to be employed post winding up as part of the carrying on of the business of the company.

(d) The making of a payment by a liquidator in good faith but which might be in breach of Section 527 of the CA cannot constitute a ground for his/her removal or for which leave to commence legal action can be granted against the liquidator. The Court should be slow to interfere with any act or decision of the liquidators unless their conduct is so unreasonable and absurd that no reasonable person would have acted in that way.

This decision brings much-needed clarity and restores the proper legal framework governing the appointment of liquidator and the scope of Liquidator’s powers and liabilities. Our clients had participated in the appeal filed by LBB and the hearing before the Federal Court was conducted by our Ms. Ng Hooi Huang together with Mr. Lim Jia Wing (who has left the firm before the decision was delivered) and Ms. Tan Wey May.

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Landmark Decision on appointment and scope of liquidator’s powers