Dissolution of a Solvent Company (Voluntary Winding-up)

Question 1

True or False.

Where the liquidation is a solvent one and the choice of the liquidator is good, the creditors are not likely to interfere.

Answer 1

True

Question 2

True or False.

Voluntary winding up is appropriate if the members are the ones who want to terminate.

Answer 2

True.

If it is a third party, then the appropriate winding up procedure is compulsory (court ordered)

Question 3

A copy of the special resolution must, within ____________ from the confirmation of the same, be printed and forwarded to the Registrar, who shall record it

Answer 3

fifteen days

Question 4

What are the ways in which a solvent company may be terminated?

Answer 4

Winding Up by Court

Voluntary Winding Up

• Subject to the supervision of the court - happens or may happen during the life of a voluntary winding up it is decided that it should be done by the supervision of the court, so it commences as a voluntary winding up.

Question 5

When is a Voluntary Winding-up deemed to have commenced?

Answer 5

Section 176 of the Companies Act

A voluntary winding-up shall be deemed to commence at the time of the passing of the resolution authorising the winding-up.

Question 6

under what circumstances do the creditors choose the liquidator?

Answer 6

Pursuant to Section 183, the company may delegate the power to appoint the liquidator to the creditors of the company. It is not readily apparent why the company would do this if it was solvent, nor why the creditors would insist on it. The creditors would have nothing to fear in terms of availability of funds and any liquidator has a duty to protect the interest of the creditors.

Also, creditors have a choice to keep the liquidator chosen or replace/add at the meeting of the creditors

Question 7

Section ____ of the Companies Act provides for the voluntary winding up of a company

Answer 7

Section 175.
(1) A company may be wound-up voluntarily,
(b)  if the company resolves by special resolution that the company be wound-up voluntarily;

Question 8

What is the first step to commencing a voluntary winding up of the company?

Answer 8

A meeting of Directors should be held at which you would determine that this (voluntary winding up) is the route you want to take.

Question 9

What is the time limit for bringing a claim against a company after restoration?

Answer 9

2 years, Bearing in mind the statute of limitation for the claim itself.

Question 10

How is a special resolution to wind up passed?

Answer 10

In order to pass a special resolution, two meetings must be held. Firstly, the resolution must be passed at an extraordinary general meeting, followed by a confirmation of the resolution at a subsequent general meeting.

Question 11

What are the liquidator’s duties in winding up the company?

Answer 11

i. Collecting in the assets of the company – tangible and intangible

ii. Paying the debts of the company and adjusting the rights of the contributories among themselves. Debts must generally be proved before they are paid, and debts of all descriptions may be proved

iii. Where winding up continues for more than 1 year, summoning a general meeting at the end of the first year and each succeeding year, and presenting an account of the winding up. as well as periodically sending a statement to the Registrar of Companies containing particulars with respect to the proceedings in, and the position of, the liquidation.

Question 12

What other resolution should be passed at the meeting confirming the resolution for winding up?

Answer 12

The second item typically on the agenda would be the appointment of a liquidator for the purpose of winding-up the affairs and distributing the assets of the company, and fixing the remuneration to be paid to her.

Question 13

Can the company continue business after winding up commences?
What, if any, business can the company carry on?

Answer 13

The company shall, from the commencement of the winding-up (i.e. the passing of the special resolution), cease to carry on its business, except so far as may be required for the beneficial winding-up thereof

The company is not barred absolutely from doing business if the liquidator finds that it is more beneficial if certain business continues i.e. if they had a contract to complete a sale then it would make sense to continue with that contract.

Question 14

what is a committee of inspection?

Question 15

How is voluntary winding up commenced?

Answer 15

a meeting has to be called to pass a special resolution for the voluntary winding-up of the company

Question 16

What should be paid first on winding up?

Question 17

What is required after the special resolution has been passed?

Answer 17

After the Special Resolution for voluntary winding-up has been passed, notice of the special resolution must be given by advertisement in the Gazette and

A copy of the special resolution must also, within fifteen days from the confirmation of the same, be printed and forwarded to the Registrar, who shall record it

Question 18

What are some determinants as to whether voluntary winding up is the proper means of terminating the company?

Answer 18

1. Whether the company is active? meaning does it have assets or liabilities (doesn’t only mean whether it is in operation)
2. If the company is active, whether the company is solvent or insolvent?
3. Who is trying to terminate the company and for what reason?

Question 19

In carry out the duties, what are the powers of the liquidator?

Answer 19

i. All powers given to a liquidator in a winding up by the court under Section 147

ii. Settling the list of contributories

iii. Making calls on shareholders for amounts unpaid on their shares

iv. Applying to the court to determine any question

v. Calling general meetings of the company for any purpose

vi. With the sanction of an extraordinary resolution of the company, paying any classes of creditors in full, making compromises with creditors or compromises with contributors, inter alia

Question 20

How is the meeting of the creditors called?

Answer 20

The liquidator must send notice by post to all persons who appear to him to be creditors of the company that a meeting of the creditors of the company will be held on a date not being less than fourteen nor more than twenty-one days after his appointment, and at a place and hour to be specified in the notice, and shall also advertise notice of the meeting once in the Gazette and once at least in two local newspapers circulating in the district where the registered office or principal place of business of the company was situate.

Question 21

What happens at the meeting of the creditors called by the liquidator?

Answer 21

The creditors will decide at that meeting whether to apply to the court for the appointment of an alternative to, or a joint liquidator to act with, the one appointed by the company, or for the appointment of a committee of inspection.

Question 22

What happens if the winding up lasts over a year?

Answer 22

Where winding up continues for more than 1 year,
-summon a general meeting at the end of the first year and each succeeding year, and present an account of the winding up, as well as
-periodically sending a statement to the Registrar of Companies containing particulars with respect to the proceedings in, and the position of, the liquidation

Question 23

How is the company dissolved?

Answer 23

By Operation of Law.

The Registrar must register the return, and on the expiration of 3 months from registration of the return, the company is deemed to be dissolved, subject to the proviso.

Question 24

Within ________ days of appointment, the liquidator is required to call a meeting of the company’s creditors

Answer 24

7 days

Question 25

In a winding up:
(a) The management of the company is generally removed from the directors (but not in all situations)
(b) The business of the company is brought to an end or “wound up”
(c) The assets of the company are realized
(d) The debts of the company are paid out of the proceeds of realization
(e) Any remaining balance is returned to the members of the company.
(f) all of the above

Answer 25

(f) all of the above

Question 26

How are the costs of winding up payable?

Answer 26

The costs of winding up are payable out of the company’s assets, in priority to all other claims

Question 27

After the ordinary resolution appointing the liquidator is passed, what should be done?

Answer 27

the liquidator shall, within twenty-one days after being appointed, file with the Registrar a notice of his appointment

Question 28

How is a company restored?

Answer 28

The court may at any time within two years of the date of the dissolution, on an application being made for the purpose by the liquidator of the company or by any other person who appears to the court to be interested, make an order, upon such terms as the court thinks fit, declaring the dissolution to have been void,

Question 29

After the ordinary resolution appointing the liquidator is passed, the liquidator shall, within _____________ after being appointed, file with the Registrar a notice of his appointment

Answer 29

twenty- one days

Question 30

Can a claim be brought against a company after it has been dissolved?

Answer 30

Yes.

on an application being made for the purpose by the liquidator of the company or by any other person who appears to the court to be interested, an order may be made, upon such terms as the court thinks fit, declaring the dissolution to have been void, and thereupon such proceedings may be taken as might have been taken if the company had not been dissolved

Question 31

What happens to the powers of the directors after a liquidator has been appointed?

Answer 31

Once the liquidator has been appointed, all the powers of the directors shall cease, except so far as the company in general meeting, or the liquidator, sanctions the continuance thereof

Question 32

How is the liquidator appointed? and at what time?

Answer 32

The appointment of the liquidator would be done by an ordinary resolution passed after the winding-up has began so the ordinary resolution to appoint the liquidator would be done at the subsequent general meeting but after the confirmation of the special resolution to wind-up

Question 33

How does the liquidator complete winding up?

Answer 33

As soon as the company’s affairs are fully wound up the liquidator must
-make up an account of the winding up, showing how it has been conducted and the company’s property disposed of;
-call a general meeting (by advertisement in the Gazette one month at least before the meeting) and present the account to the members of the company;
-within one week, make return to the Registrar of the general meeting

The Registrar must register the return, and on the expiration of 3 months from registration of the return, the company is deemed to be dissolved, subject to the proviso

Question 34

How is a notice of the Special Resolution given?

Answer 34

by advertisement in the Gazette