Describe with the aid of examples, the authorities, representative bodies or persons that exercise some form of authority over the winding up process of a company in each of the type of winding up recognized by the Companies Act 1995.

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Describe with the aid of examples, the authorities, representative bodies or persons that exercise some form of authority over the winding up process of a company in each of the type of winding up recognized by the Companies Act 1995.

Winding up is a term commonly associated with the ending of a company’s existence. The purpose of a winding up process is “to ensure that before the company’s existence ceases, all its affairs are dealt with, which means removing the company from all its legal relationships. Its contracts must be completed, transferred or otherwise brought to an  end; it must cease carrying on business; its liabilities must be met as far as possible and lastly the legal  proceedings to which it is party must be determined.”

On liquidation, the directors of the company lose all powers of management and any transactions undertaken  by the company after the commencement of the liquidation are void.  The company gives up its business, sells off its assets, pays its debts or if it is insolvent does so to the extent that its funds allow and distributes whatever surplus remains against its shareholders or otherwise as its memorandum and articles of association may  provide. The process of winding up is placed in the hands of a liquidator.

The different types of winding up

‘Compulsory winding up’ is a type of winding up done by the Court. The liquidation results from the Court making an order that the company shall be wound up. Upon the making up of a winding up order:-

  • the custody and control of all the property in action of the company are transferred from those persons who were entitled under the memorandum and articles to manage its affairs and on its behalf, to a liquidator charged with the legal duty of dealing with the company’s assets in accordance with the statutory scheme. Any disposition of the property of the company otherwise than  by the liquidator is void.
  • The liquidator is to collect the assets of the company and to apply them in discharge of its liabilities. If there is a surplus, he must distribute it among the members of the company in accordance with the memorandum  and articles of association.

All powers of dealing with the company’s assets, including the powers to carry on its business so far as may be necessary for its beneficial winding up, are exercisable by the liquidator for the benefit of those persons who are entitled to a share of the proceeds. The company itself, as a distinct legal person from its members, can never be entitled to any part of the proceeds. Upon  completion of the winding up, the company is struck off the Register.

Where the Court has made a winding up order, a statement of the company’s affairs must, unless the Court or the official receiver order otherwise, be made out and submitted to the official receiver. It must be in the prescribed form so it will be accepted by the receiver, verified by affidavit and show;

  • “particulars of assets, debts and liabilities
  • names, residences and occupations of creditors
  • securities held by them and the dates when these were given
  • any further information that the official receiver may  require.”

The statement must be submitted and verified by the director/s of the company and/or by any present or past officers of the company, and/or persons who have taken part in the formation of the company, depends on what  the official receiver requires. The statement shall be submitted within twenty-one days from the relevant date or within such extended period as the official receiver or the court may for special reasons appoint.

Our First Hall, Civil Court has jurisdiction to order the winding up of any company registered under the Companies Act. An application to the Court to order the winding up of a company may be presented by:

  • the Company or its Directors
  • any Debenture Holder
  • any one or more of the company’s Creditors or Contributories
  • the Official Receiver
  • the Registrar of Companies

The Registrar of Companies may  file the winding up application if it appears to him that it is ‘expedient and in the public interest that  a company be dissolved and wound up’.

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‘Voluntary winding up’ is initiated by a general meeting of the members of the company passing a resolution that the company shall be wound up. Our Companies Act distinguishes between a members’ and a creditors’ winding up.

  • A members’ voluntary winding up occurs when the directors of the company have within four weeks before the winding up resolution is passed made a statutory declaration as to the company’s solvency at a board meeting, and have in that declaration stated that, after having fully examined the company’s situation, they agreed that the company will be able to pay its debts in full within ...

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