At the end of this topic the students should be able to:
• Identify and explain the various types of winding up of a company
Types of winding up Winding Up
Voluntary
members
compulsory
creditors
Voluntary Winding up
Type of voluntary winding up Members voluntary winding up
Creditor voluntary winding up
Members voluntary winding up
Declaration of solvency
•
The sole director or majority of directors have passed a declaration that the company is solvent. (section 443 and section 444).
Requirements of the directors’ declaration of solvency 1. The declaration must be made before the notice calling for the member’s meeting to decide on the winding up is given to its members. 2. The declaration is made by the sole director or the majority directors. 4. The declaration must be lodge ROC and give notice of the resolution in a notional language newspaper and English language newspaper within 7 days. 5. The declaration is made within 5 weeks before resolution for voluntary winding up
The written declaration of solvency shall contain:-
a) The directors have enquired into the affairs of the company; b) At a meeting of directors, an opinion has been formed that the company will be able to pay its debt in full within months after the commencement of the company’s winding up c) A statements on the assets, liabilities and the estimated expenses of winding up.
If the company could pay its debts in full within the 12 months after the commencement of winding up, the directors would be deemed to have made the declaration without reasonable ground.
Commencement of member’s voluntary winding up:• It commences when the members resolution is passed as per section 441 (1).
Effects of member’s voluntary winding up:• The corporate status and powers continue until the company is dissolved. • The transfer of shares made after commencement of winding up is void • The company need to appoint one or more liquidators to liquidate the company’s asset • The company cannot continue its business unless the liquidator is on the pinion that it is “for the beneficial winding up”. • The powers of the directors will cease upon the appointment of liquidator.
Conversion of members’ voluntary winding up to creditors’ voluntary winding up
• The creditors at the creditors’ meeting, may appoint some other person to be the company’s liquidator to replace the company appointment liquidator • Once the Creditors meeting under section 449 is held, the members’ voluntary meeting up is converted into a creditors’ voluntary winding up. • The meeting of creditors will have the effect as if the directors’ declaration of solvency had not been made
Commencement of creditor’s voluntary winding up:-
• The commencement of creditor’s winding up would depend on the appointment of an interim liquidator. • If one is appointed, the company need to lodge the directors’ statutory declaration of insolvency with the ROC. • If not, it commence when the members pass a resolution for voluntary winding up.