LEGISLATIVE GUIDE TO WINDING UP PROCESS (1) Compulsory Winding Up

Grounds: s.220 (a) (e)

Five in all - most common found at s.220 (d) and (e) inability to pay debts and the just and equitable ground

Inability to pay debts: s.221 and note s.221 (e) broad definition if proved to the satisfaction of the court that the company unable to pay its debtsProcedure: s.222 by petition for a winding up order by company, creditors, contributories (in certain circumstances by the Minister and by the Trustee in Bankruptcy) and note the proviso to s. 222 generally Commencement: s.227 on presentation of the petition except where before that resolution passed for a voluntary winding up

Provisional Liquidator: s.235 allows court to appoint one after presentation of petition May be Trustee or any fit personEffect of Winding Up Order: s.228-229 Copy order to be sent to company and Registrar of Companies (ROC) no actions allowed against company except by leave of court- (N.B. at common law order operates to terminate employment of employees and agents of company and the office of directors their power to act on companys behalf ceases )Appointment of Liquidator : s.234 power of court to appoint liquidator may be done at same time as winding up order N.B. s.235 no body corporate may be liquidator N.B. also events/prohibitions /actions activated by appointment of provisional liquidator under s.235 or making of winding up order actions stayed (s.229), statement affairs due (s.232), custody of companys property taken (s.239)

Liquidators: s.236 Trustee becomes provisional liquidator (Different position to that which he may hold under s.235 above after presentation of petition) Trustee to summon meetings of creditors and contributories to determine whether application to be made to court re appointment of another person as liquidator Court makes order re appointment and if contributories and creditors differ court decides which where no liquidator appointed by court, Trustee becomes the liquidatorConditions Precedent to Acting as Liquidator: s.237 applies to other liquidators other than Trustee cannot act until notice of appointment sent to Registrar and security given

Report by Trustee : s.233 where winding up order made Trustee to submit preliminary report to court on companys capital, assets liabilities, and if company has failed, causes of failure, whether he is of the opinion that further inquiry into company desirable may also make further reports giving his opinion on whether fraud committedNotification that Company in Liquidation: s.327

Settlement of list of contributories: s.252

Collection of Assets & Discharge of Liabilities: s.252 court charged with responsibility but N.B. s.268 (delegation to liquidator)

Powers of Liquidator: s.241 some exercised with sanction of court or committee of inspection all subject to overall control of court

Influence of Creditors and Contributories: s.242 in administration of assets and distribution among creditors, liquidator to have regard to directions given by resolution of creditors or contributories or committee of inspection. Liquidator may summon meetings to ascertain wishes and may also apply to court for directionsAdministrative Duties of Liquidator: ss.243-245 to keep proper books with minutes of proceedings at meetings, etc to pay money received into court directed bank not less than twice per annum, to send account of receipts and payments to ROCProving of Debts: s.309Ranking of Claims: s.310 as in bankruptcy

Preferential Payments: s.311

Invalidity of Fraudulent Preferences: s.312

Invalidity of Certain Floating Charges: s.314

Winding Up Taking Over 1 Year: s.331 at intervals liquidator must send statement re proceedings in and position of liquidation to ROC

Dissolution: s.269 When affairs completely wound up liquidator may apply to court for dissolution order. Company dissolved from date of order- within 14 days liquidator to forward order to ROC Release of Liquidator: s.247 (see basic description of liquidation process here) on completion or practical completion of same, liquidator may apply to ROC to be released(2) Members Voluntary Winding Up

Definition: s.277 (4)

Circumstances in which company may be wound up voluntarily: s.272 - in particular by special resolution (s.272 (1)(b))Notice of Resolution: s.273 within 14 days to Gazette and ROC

Commencement: s.274 on passing of resolution

Declaration of solvency: s.277 by directors must be made no earlier than 5 weeks before passing special resolution and delivered to ROC for registration within that time must contain statement of companys assets and liabilities as at last practicable date before declaration

Appointment of Liquidator: s.279 - by company in general meeting all directors powers cease except so far as company in general meeting or liquidator sanctions continuance thereof (Note s. 325 liquidator may not be a body corporate)

Notice of Appointment: s.299 within 21 days to Gazette, daily newspaper, ROC

Effect of Winding Up on Business/Status of Company: s.275 Company ceases to carry on business save as required for beneficial winding up

Company Found to be Insolvent: s.282 if liquidator is of such opinion must summon creditors meeting and present statement of companys assets and liabilities

Distribution of Companys Property: s.296 subject to provision re preferential payments property to be applied in satisfaction of liabilities pari passu and subject to articles, distributed among members in accordance with their rights and interests in company

Powers of Liquidator: s.297 some powers exercisable with sanction of extraordinary resolution of company

Winding Up Continues for More Than 1 Year: s.283 liquidator must summon general meeting of company at end of 1st year or within 3 months from them and each succeeding year and present account of acts and dealings and conduct of winding up during year

s.331 liquidator must send statement to ROC containing particulars with respect to proceedings in and position of liquidation

Proof of Debts: s.309

Costs of Winding Up: s.302

Ranking of Claims: s.370

Preferential Payments:s.311

Fraudulent Preferences: s.312

Floating Charges: s.314

Notification that Company in Liquidation: s.327

Final Meeting and Dissolution: s.284 when affairs wound up, liquidator to make up account of winding up showing how conducted and property of company disposed of. Copy account and return of meeting sent to ROC (N.B. procedure for calling meeting set out) on receiving account and return, ROC registers them on expiration of 3 months from registration of return company dissolved(3) Creditors Voluntary Winding Up Definition: s.277(4)Circumstances in which Company may be So Wound up: s.272(1)(c) extraordinary resolution by reason of liabilities advisable to wind up insolvent

Notice of Resolution: s.273 within 14 days notice by advertisement in gazette and in writing to ROC

Commencement: s.274 upon passing of resolution

Meeting of Creditors: s.287 company to cause creditors meeting to be summoned for day or day following meeting to pass resolution to wind up notices to creditors to go same time notices of meeting of company notice of creditors meeting to be advertised in Gazette and daily newspaper full statement of companys affairs and list of creditors and established amount of their claim to be laid before meeting of creditors by directors

Appointment of Liquidator: s.288 creditors and company nominate person to be liquidator if different persons nominated the creditors nominee shall be liquidator subject to right of any creditor, director or member of company to apply to court for an order directing that nominee of company should be liquidator or act jointly with creditors choice of liquidator or that someone else altogether should be liquidator- remuneration of liquidator fixed by committee of inspection (if there is one) or by creditors ( if there is none)(s.290)

Appointment of Committee of Inspection: s.289 meeting of creditors (either 1st one or subsequent meeting) may appoint 5 persons on a committee of inspection if so appointed, company may , either at meeting where resolution passed or at subsequent meeting, appoint up to 5 persons as members of committee creditors can object to company appointees subject to direction of court same rules apply to this committee as to one in a compulsory winding up (s.249)

Powers of Directors: S.290 cease on appointment of liquidator except so far as committee, or if no committee, the creditors, sanction continuance

Powers of Liquidator: s.297 Same as in members voluntary winding up except some powers exercised with sanction of court or committee instead of company in general meetingDistribution of Company Property: s.296

Costs of Winding Up: s.302 constitute pre-preferential debts -payable out of assets of company in priority to all other claims

Proof of Debts: s.309

Preferential Payments: s.311

Fraudulent Preferences: s.312

Floating Charges: s.314

Notification That Company in Liquidation: s.327If Winding Up Continues for More Than 1 Year: s.302 In addition to calling meeting of company must also call meeting of creditors to lay account before them and do same as for members voluntary under s.283 (see also s.331 information as to pending liquidations)

Final Meeting and Dissolution: s.294 when affairs wound up liquidator makes up account of winding up, calls general meeting of company and creditors meeting to lay account before them and give explanations (NB procedure for calling meetings) within one week of meetings liquidator to send ROC copy of account and return of meetings. On receiving account and returns ROC registers them and 3 months thereafter company deemed dissolved. 2012. 03. 14Cameal Neal slides on winding up The 14 days notice is for the extraordinary and 21 days for the special resolution page 6 of slide Firstly liquidation/winding up

The process whereby we terminate the life of a company; a corporate person was born so termination requires that formalities be observed upon its termination.

Secondly liability to members in a winding up

If limited by shares limited by unpaid shares; limited by guarantee - limited to the amount guaranteed; if limited by guarantee with a share capital limited to both unpaid shares and amount guarantee.

Thirdly what must exist for a court to do a winding up? Company is unable to pay its debts what evidence will the court use s221 Company indebted to a creditor in the sum of $500k and creditor served notice of payment and company unable to pay the sum after 3 weeks

Judgment decreed against the company and bailiff could only partially satisfy the debt

Contingent and prospective liabilities of the company Company no longer wants to continue the business

Just and equitable forms a very significant part of persons who petition the court Look to case law for just and equitable examples include

Deadlock between members

Directors are also controlling shareholders and are mismanaging the company 213a

Loss of mutual trust and confidence between members Fourthly - who has the locus standi Creditors

Contributors

Company the directors acting for the company passes resolution; (singly or jointly)S340 (1) UK 1949 Winding Up Rules apply

Fifthly how should the Petition be brought? The Winding Up Rules dictate the procedure

Rule 26 states how the Petition should be done

Rule 28 service and publication of the Petition

Sixthly winding up by the court

The Trustee in Bankruptcy is official Liquidator

when the court makes the order the court may make an order that a statement of affairs be sworn to and served on the Trustee in Bankruptcy After receipt of S of A starts proceedings for winding up

Take into custody and control all assets

Advertise for creditors

Seventhly voluntary winding up

3 types of voluntary winding up

Procedure 6