Voluntary winding up
A voluntary winding up can be either a members’ voluntary winding up or a creditors’ voluntary winding up. Both require the passing of a special resolution that the company to be wound up. In a members’ voluntary winding up the company is solvent, while in a creditors’ voluntary winding up it is usually insolvent.
A members’ voluntary winding up is often the result of a reconstruction or merger. A creditors’ voluntary winding up is brought about by a resolution of the company resolving that by reasons of its liabilities, it can no longer carry on with the business and that the company should be wound up. A liquidator is appointed at a meeting of creditors convened within one day of the passing of such a resolution. A company may be wound up voluntarily in the following circumstances (Section 254):
1. when the period, if any, fixed for the duration of the company by the memorandum or articles expires, or the event, if any, occurs, on the occurrence of which the memorandum or articles provide that the company is to be dissolved and the company in general meeting has passed a resolution requiring the company to be wound up voluntarily, or
2. if the company so resolves by special resolution.
After the passing of the resolution for voluntarily winding up, the company must:
(a) within seven days lodge a printed copy of the resolution with the Registrar (Section 254(2)(a)), and
(b) within ten days give notice of the resolution in a local newspaper (Section 254(2)(b)).
Failure to lodge the resolution with the Registrar and to give notice is an offence (Section 254(3)).
A voluntary winding up commences with the passing of the special resolution (Section 254(1)).
Members’ voluntary winding up
Notice of resolution on voluntary winding up must be lodged with the Registrar within seven days of passing and must be published in the local newspapers within 10 days of passing (Section 254(2)).
Declaration of solvency
A members’ voluntary winding up means a winding up in which a declaration of solvency has been made and delivered in accordance with the requirements of the Act (Section 257).
The majority of the directors may (before the date on which the notices of the meeting at which the resolution for the winding up is to be proposed are sent out) make a statutory declaration to the effect that they have inquired into the affairs of the company and have formed an opinion that the company is able to pay its debts in full within a period of 12 months of the commencement of the winding up as specified in the declaration of solvency.
If, however, at any time during the continuance of a members’ voluntary winding up, the liquidator is of the opinion that the company will not be able to pay its debts in full within the period in the declaration of solvency, the liquidator must forthwith summon a meeting of creditors. The liquidator must also present a statement of the company’s affairs before that meeting (Section 259). This is then called a creditors’ voluntary winding up.
Annual meeting of members
If the winding up continues for more than a year, the liquidator must summon a general meeting of the company and lay before an account of his/her acts and dealings, and of the conduct of the winding up during the preceding year. Similar meetings must be summoned at the end of each succeeding year where the winding up continues (s 271). As the meeting is a meeting of the company, the requirements and procedures for the summoning of a general meeting is governed by the articles of association.
Creditors’ voluntary winding up
A creditors’ voluntary winding up is a winding up in which a declaration of solvency has not been made and delivered to the Registrar within the time prescribed by the Act (Section 257).
Meeting of the company
If the company considers that it is insolvent and should be wound up, it may report the matter to its members. The members at the meeting specifically called to consider the matter may:
(a) resolve by special resolution that the company be wound up
(b) appoint a liquidator.
A meeting of creditors must be summoned for the day or the day following the shareholders’ meeting (Section 260). At this meeting a statement of affairs must be tabled. A director and the company secretary must attend to explain the situation.
The creditors must be given at least seven clear days’ notice by post of the meeting. Each notice must contain a statement showing the names of all creditors and the amounts of their claims (Section 260(2)). The company must also advertise the
notice of the meeting of creditors in a local newspaper at least seven days before the meeting (Section 260(3)). A notice may take the following form:
NOTICE OF MEETING OF CREDITORS
NOTICE IS HEREBY GIVEN that a meeting of the Creditors of the above named
Proxies must be lodged at the Registered Office not less than 48 hours before the
BY ORDER OF THE BOARD
The creditors may nominate a liquidator. The liquidator may be also appointed by the members in which case, the creditors’ nominee supersedes the members’ appointed liquidator (Section 261(1)). Any director, member or creditor may apply to the court for an order directing that the person nominated as liquidator by the company shall be liquidator instead of the person nominated by the creditors. This application must be made within seven days after the date on which the nomination was made by the creditors (Section 261(2)). The creditors may also appoint a committee of inspection (Section 262).
Annual meeting of creditors
If the winding up continues for more than a year, the liquidator must summon a creditors’ meeting of the company and table before that meeting an account of his/ her acts and dealings and of the conduct of the winding up during the preceding
year. Similar meetings must be summoned at the end of each succeeding year where the winding up continues (Section 271).
Committee of inspection
Although the liquidator is charged with the ultimate responsibility of administering the winding up, he/she may be assisted in the performance of this duty by a committee of inspection.
The Act provides (Section 241) that the liquidator must, if requested by any creditor or contributory, summon separate meetings of the creditors and contributories for the purpose of determining whether the creditors or contributories require the appointment of a committee of inspection to act with the liquidator, and if so, who are to be its members. If there is a difference between the determinations of the meetings of the creditors and contributories, the court must decide and give its order.
Creditors at a creditors’ meeting may appoint representatives to the committee. Although the company may appoint representatives, the creditors may resolve that only their representatives may act as members of the committee, and unless the court otherwise directs, it is the creditors’ appointees who may act. The maximum membership is five (Section 262).
Some of the powers vested in the committee are as follows:
1. Sanctioning certain powers of the liquidator (Section 269(1)(a), 285).
2. Sanctioning the continuance of directors’ powers in a creditors’ voluntary winding up (Section 261(4)).
3. Fixing the liquidators’ remuneration in a creditors’ voluntary winding up (Section 261(3)).
4. assisting the liquidator, and in this respect, members of the committee may have the relevant experience and expertise to advise the liquidator about some of the activities which the company may have undertaken before it entered liquidation.