No accounts, no filings — what actually happens? Penalties, strike-off, and that bank account still in use

Hook

Let me ask you something you may not be able to answer: is your company still on the register? Not "is it trading". Does it still exist in law? Every year we come across a few bosses like this: the business is still running, the staff are still there, money still moves through the bank account every day — but that company was struck off long ago. And he was not the one who closed it. SSM struck it off by itself.

Three legal forms, and every one of them owes something each year

First, be clear: whichever form you are in, there are things that must be done every year. A private limited company owes three. One, the annual return. The provision says: in each calendar year, within thirty days of the anniversary of incorporation, the annual return must be lodged. Not in the year of incorporation itself. Two, sending the financial statements to the shareholders. A private company has to send them out within six months of the end of the financial year. Three, lodging the financial statements with the registry — within thirty days of sending them to the shareholders. A limited liability partnership: one annual declaration to lodge each year. A sole proprietorship or a partnership: the registration expires and has to be renewed. Three forms, three sets of obligations. What they have in common is that none of them falls away just because you made no money this year.

What happens if you do not: first the penalties

The first layer of consequence is the most direct: penalties. And one thing here that a lot of bosses do not know — the penalty is not on the company alone. The provision says "the company and every officer". An officer means the directors, and it takes in the company secretary as well. One example: financial statements not sent to the shareholders in time — a fine not exceeding RM50,000, and for a continuing offence a further daily amount. So this is what you get: the company's books are empty, and the penalty is recorded against the director personally. "The company has no money" is not a defence.

And one that is new: beneficial ownership

One more has been added in recent years, and many bosses still do not know about it: the reporting of beneficial ownership. It means: who is the real person behind this company? Not the name on the register — the person who ultimately controls it and ultimately benefits from it. The company has to keep that record and lodge it with the registry, and where the particulars change, update it within fourteen days. The penalty: a fine not exceeding RM20,000, with a further daily amount for a continuing offence. And both the company and its officers are liable. A limited liability partnership has to report it too, together with the annual declaration.

The second layer: the registry strikes you off

Penalties are only the first layer. The second is far more serious. The provision on the annual return has a further sentence after it, and this is the most important sentence in the episode: where a company has not lodged its annual return, the Registrar may strike its name off the register. Note that carefully — the Registrar strikes it off; you did not apply. You did not "close the company". The company was closed, and you may not know it. And what happens to a company that has been struck off? The provision is very clear: on being struck off the company is dissolved — but the liability of every director, officer and member continues, and may be enforced as if the company had never been dissolved. In other words: the company is gone, your liability is not. So is that any different from a boss applying to strike it off himself? The outcome is the same. The difference is that the one who applied did so after clearing the debts and finishing the accounts. The one who was struck off had nothing settled at all when it was taken away.

How do you check? And the stages of a strike-off

By now you must be asking: "How do I know if I am on the list?" You can check, and it is free. SSM's website has a page for exactly that. The link is on the episode page; go and click it yourself. There are three things on that page, they do different jobs, and a lot of people mix them up. The first: the progress of a strike-off application. If you (or your secretary) lodged an application to strike off, this is where you see how far along it is. The second and the third: two published lists. One is the list of companies struck off on application. The other — and pay particular attention to this one — is the list the Registrar struck off on its own motion. Then the stages. A strike-off does not happen in a day; it runs in order. Stage one: notice. The registry sends notice to the company. You have thirty days to reply and state your case. Stage two: publication. With no reply, or a reason that is not accepted, it is published. Thirty days from publication, anyone may object. Stage three: the gazette. If nobody stops it, the name goes into the gazette — and at that moment the company is dissolved. Stage four: seven years. Within seven years of dissolution, a person aggrieved may still apply to the court for reinstatement. Why go through the stages? Because what you can do differs at each one. Still inside the notice period, one letter stops it. Already gazetted, and you are going to court. The difference between the two is a letter and a court case.

The bank account that is still moving (the hardest part of this episode)

Now the thing the bosses ask about, and something we have genuinely run into: the company has already been struck off, and the bank account is still in use. Money still coming in every day, suppliers still being paid. It is the same on the sole proprietorship side — the registration expired two years ago, but the account is still there and money goes in and out as usual. Let me say something that may make you pause. The provision reads: after a company is dissolved, any property not yet disposed of vests in the Registrar. Vests in the Registrar. That money is in the bank, it still looks like it is in your name, you may even still be able to move it — but in law it has already changed hands. And the bank will find out sooner or later. Banks periodically reconcile a customer's registration status — and once it matches up, the account is frozen. Not "you cannot open a new one". The money inside it is money you cannot touch. On the sole proprietorship side the problem is different but just as troublesome: carrying on business with an expired registration carries, in the provision, a fine not exceeding RM50,000, or imprisonment not exceeding two years, or both.

The third layer: your personal tax liability

The third layer touches your own money. There is a provision in the tax law: a director who meets the conditions is jointly and severally liable for the company's tax. We took the conditions apart in the episode on directors' loan accounts — in plain terms, it is "involved in the management" plus "a shareholding at or above a set percentage". So this is what can happen: the company has stopped trading, it has been struck off, the account is frozen — and the tax the company owes may follow you personally. And if the company's accounts were never done, that means the tax was never filed. The years that were not filed do not disappear by themselves. A sole proprietorship is more direct still — there is no company layer in between, so the tax on the business is your own personal tax.

What to do when the penalty arrives

Right. Plenty of consequences. Now, what to do about them. The first thing, and the most important: a penalty does not disappear because you ignore it. It only grows. The second thing: the registry has a remission mechanism. It is tiered, and — this is the part many people do not know — in most cases it applies automatically; you do not have to write in and plead for it. The principle is simple: the earlier you deal with it, the more comes off. But a few warnings. First, it does not apply to every kind of penalty. Some categories are excluded. Second, how much comes off varies with the campaign of the day. So I am not going to give you any percentage here — give you one and it will be wrong next year. Third, and this is the most practical line in the section: ring your own company secretary. He has your company's full lodgement record, he knows which years and which documents are outstanding and how the remission is being worked out right now. It is one phone call for him, and you could guess for three days and still not get it right.

Is it too late?

Most bosses who have read this far are asking themselves one question: "If I catch up now, is it too late?" In most cases: no. A company that has been struck off still has a route to reinstatement in law. The annual returns and the statements you owe can be lodged late. Penalties can be dealt with. But there is one honest thing I have to say: each year you leave it, the cost does not add, it multiplies. Catching up one year of accounts is a job. Catching up five — the documents are lost, the people have left, the bank statements have to be reconciled from scratch — that is an entirely different exercise, and many times more expensive. What you do today is at today's price.

To close

To close in a sentence: you are allowed to stop trading. But as long as that registration is on the register, every year it still wants something from you. If you do not want it any more, close it down properly. If you are still going to use it, keep it in good order. The worst is the third option — leaving it alone. That is the only kind of cost that grows by itself. Want to know what those companies in your name actually owe right now? Grab a coffee first and talk about your business. For the accounting, come to LTT. I am LTT, helping SME bosses get their accounts straight. Follow us, and see you next time.