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205 Powers of liquidator

Powers of liquidator

The liquidator, in exercising any of the powers conferred on him/her by virtue of the Act, is subject to the control of the court (Section 277(2)). Any creditor or contributory may apply to the court with respect to any exercise or proposed exercise of any of those powers (Section 279).

The liquidator may apply to the court for the determination of any question arising in the winding up, or to exercise any of the powers which the court may exercise if the company were being wound up by the court (Section 277(2)).

 

Winding up by the court

In a court winding up, the liquidator has the following powers sanctioned by the court or by the committee of inspection (Section 236):

(1) Power to pay any class of creditors in full.

(2) Power to make any compromise or arrangement with creditors or persons claiming to be creditors, or having or alleging themselves to have any claim (present or future, certain or contingent, ascertained or sounding only in damages) against the company, or whereby the company may be rendered liable.

(3) Power to compromise, on such terms as may be agreed:

(a) all calls and liabilities to calls, all debts and liabilities capable of resulting in debts, and all claims (present or future, certain or contingent, ascertained or sounding only in damages) subsisting or supposed to subsist between the company and a contributory or alleged contributory or other debtor or person apprehending liability to the company, and

(b) all questions in any way relating to or affecting the assets or the winding up of the company, and take any security for the discharge of any such call, debt, liability or claim and give a complete discharge in respect of it.

(4) Power to bring or defend any action or other legal proceeding in the name and on behalf of the company.

(5) Power to carry on with the business of the company so far as may be necessary for its beneficial winding up.

(6) Power to sell any of the company’s property by public auction or private contract with power to transfer the whole of it to any person or to sell the same in parcels.

(7) Power to do all acts and execute, in the name and on behalf of the company, all deeds, receipts and other documents and for that purpose to use, when necessary, the company’s seal.

(8) Power to prove, rank and claim in the bankruptcy, insolvency or sequestration of any contributory for any balance against his/her estate, and to receive dividends in the bankruptcy, insolvency or sequestration in respect of that balance, as a separate debt due from the bankrupt or insolvent, and can be rated with the other separate creditors.

(9) Power to draw, accept, make and endorse any bill of exchange or promissory note in the name and on behalf of the company, with the same effect with respect to the company’s liability as if the bill or note had been drawn, accepted, made or endorsed by or on behalf of the company in the course of its business.

(10) Power to raise on the security of the assets of the company any money requisite.

(11) Power to take out in his/her official name letters of administration to any deceased contributory, and to do so in his/her official name any other act necessary for obtaining payment of any money due from a contributory or his/her estate, which cannot conveniently be done in the name of the company. In all such cases the money due is deemed, for the purpose of enabling the liquidator to take out letters of administration or recover the money, to be due to the liquidator himself/herself.

(12) Power to appoint an agent to do any business which the liquidator is unable to do himself/herself.

(13) Power to do all such other things as may be necessary for winding up the company’s affairs and distributing its assets.

Certain powers and duties of the court may also be delegated to the liquidator. The following matters may be delegated (Section 252):

1. The holding and conducting of meetings to ascertain the wishes of creditors and contributories.

2. The settling of lists of contributories and the rectifying of the register of members where required, and the collecting and applying of assets.

3. The paying, delivery, conveyance, surrender or transfer of money, property, books or papers to the liquidator.

4. The making of calls.

5. The fixing of a time within which debts and claims must be proved.

However, the liquidator must not, without the special leave of the court, rectify the register of members (Section 252). Similarly, the liquidator cannot make any call without either the special leave of the court or the sanction of the liquidation
committee.

To assist the liquidator in performing his/her duties, he/she may apply to the court for directions in relation to any particular matter arising under the winding up (Section 237(3)).

Rule 163 of the Companies (Winding Up) Rules, 1972, provides that the court  that ordered the winding up of the company shall have power to hear all pending matters brought by or against the company. The rationale for the said Rule 163 in directing all proceedings regarding a company that is wound up or to be wound up to be heard by the winding-up court is to prevent duplicity of proceedings. This is also because the winding-up file contains all affidavits and other cause papers that had been filed. In other words, the winding-up court has a complete record of the winding-up proceedings and is in the best position to give directions concerning the company that it had ordered to be wound up.

 

Voluntary winding up

In a voluntary winding up the liquidator may exercise the following powers with the sanction of the committee of inspection (Section 274):

(1) Power to pay any class of creditors in full.

(2) Power to make any compromise or arrangement with creditors or persons claiming to be creditors, or having or alleging themselves to have any claim (present or future, certain or contingent, ascertained or sounding only in damages) against the company, or whereby the company may be rendered liable.

(3) Power to compromise, on such terms as may be agreed:

(a) all calls and liabilities to calls, all debts and liabilities capable of resulting in debts, and all claims (present or future, certain or contingent, ascertained or sounding only in damages) substituting or supposed to subsist between the company and a contributory or alleged contributory or other debtor or person apprehending liability to the company, and

(b) all questions in any way relating to or affecting the assets or the winding up of the company, and take any security for the discharge of any such call, debt, liability or claim and give a complete discharge in respect of it.

The remaining powers do not require sanction:

(4) Power to bring or defend any action or other legal proceeding in the name and on behalf of the company.

(5) Power to carry on the business of the company so far as may be necessary for its beneficial winding up.

(6) Power to sell any of the company’s property by public auction or private contract with power to transfer the whole of it to any person or to sell the same in parcels.

(7) Power to do all acts and execute, in the name and on behalf of the company, all deeds, receipts and other documents and for that purpose to use, when necessary, the company’s seal.

(8) Power to prove, rank and claim in the bankruptcy, insolvency or sequestration of any contributory for any balance against his/her estate, and to receive dividends in the bankruptcy, insolvency or sequestration in respect of that balance, as a separate debt due from the bankrupt or insolvent, and can be rated with the other separate creditors.

(9) Power to draw, accept, make and endorse any bill of exchange or promissory note in the name and on behalf of the company, with the same effect with respect to the company’s liability as if the bill or note had been drawn, accepted, made or endorsed by or on behalf of the company in the course of its business.

(10) Power to raise on the security of the assets of the company any money requisite.

(11) Power to take out in his/her official name letters of administration to any deceased contributory, and to do in his/her official name any other act necessary for obtaining payment of any money due from a contributory or his/her estate which cannot conveniently be done in the name of the company. In all such cases the money due is deemed, for the purpose of
enabling the liquidator to take out letters of administration or recover the money, to be due to the liquidator himself/herself.

(12) Power to appoint an agent to do any business which the liquidator is unable to do himself/herself.

(13) Power to do all such other things as may be necessary for winding up the company’s affairs and distributing its assets.

Liquidators of a company in voluntary liquidation who act according to the wishes of a majority of the contributories of the company are not guilty of breaching their fiduciary duties as long as the liquidators’ actions are sanctioned by the majority. Delays in making the necessary distributions and the use of company funds contrary to Section 285 and do not amount to a breach of fiduciary duties.

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