Dissolution of an Insolvent Company (Compulsory Winding-up) Flashcards
who is a provisional liquidator?
The court may make such an appointment provisionally at any time after the presentation of a petition and before the making of an order for winding up, whose role would be to protect the assets of the company
When the winding up order is made, the __________ becomes ______________.
When the winding-up order is made, the Official receiver becomes provisional liquidator
What are the common grounds for winding up a company?
The most common grounds are found at (e) and (f)
(e) the company is unable to pay its debts;
(f) the court is of opinion that it is just and equitable that the company should be wound-up.
When is the company dissolved?
Section 168.
(1) When the affairs of a company have been completely wound- up, the court shall make an order that the company be dissolved from the date of the order, and the company shall be dissolved accordingly.
How/When is the Official Reviever appointed?
When the winding up order is made, the Official receiver becomes provisional liquidator
How are debts satisfied?
Debts must be proved. The debts which are considered preferential (Section 201)
A secured creditor has a superior right over the assets that secured their debt. If their debt can be satisfied with the realization of the asset then good. If the realization of the assets gives more than the debt then the liquidator needs to ensure that the balance is recovered and added to the company’s pool of assets. If the realization of the asset gives less than the debt then the creditor gets all and the balance owed to the creditor will then make them an unsecured creditor and they can make a claim like other unsecured creditors and don’t have priority
When is Company deemed unable to pay its debts?
(a) a creditor, by assignment or otherwise, to whom the company is indebted in a sum exceeding two hundred and fifty dollars then due, has served on the company, by leaving the same at its registered office, a demand under his hand requiring the company to pay the sum so due, and the company has for three weeks thereafter neglected to pay the sum, or to secure or compound for it to the reasonable satisfaction of the creditor;
(b) execution or other process issued on a judgment decree or order of any court in favour of a creditor of the company is returned unsatisfied in whole or in part;
(c) it is proved to the satisfaction of the court that the company is unable to pay its debts and, in determining whether a company is unable to pay its debts, the court shall take into account the contingent and prospective liabilities of the company; or
(d) it is a company to which the Insurance Act applies and it does not possess the margin of solvency specified in section 53 (2) of the Insurance Act, Cap.251.
Why is the procedure by which an insolvent company is liquidated somewhat different from that applicable to solvent companies?
The rationale for this is clear. In the case of the insolvent company, the company’s creditors are at a greater risk of suffering loss and so, generally speaking, are given a greater role in the process.
How is compulsory winding up initiated?
Section 133.
(1) An application to the court for the winding-up of a company shall be by petition, presented subject to this section either by the company or by any creditor or creditors…
Where the court has made a winding-up order, there shall be made out and submitted to the Official Receiver a statement as to the affairs of the company in the prescribed form, verified by affidavit, and showing the particulars of its assets, debts and liabilities, the names, residences and occupations of its creditors, the securities held by them respectively, the dates when the securities were respectively given, and such further or other information as may be prescribed or as the Official Receiver may require.
When is compulsory winding up deemed to have commenced?
Section 135 A winding-up of a company by the court shall be deemed to commence at the time of the presentation of the petition for the winding up.
Give three grounds for compulsory winding up according to the companies Act.
Section 130
(1) A company may be wound up by the court if,
(a) the company has by special resolution resolved that the company be wound up by the court;
(b) default is made in filing the statutory report or in holding the statutory meeting;
(c) the company does not commence its business within a year from its incorporation, or suspends its business for a whole year;
(d) the number of members is reduced, in the case of a private company, below two, or, in the case of any other company, below seven;
(e) the company is unable to pay its debts;
(f) the court is of opinion that it is just and equitable that the company should be wound-up.
What should be done with the order for winding-up after it is made?
On the making of a winding-up order, a copy of the order must forthwith be forwarded by the company to the Registrar, who shall make a minute thereof in his books relating to the company.
who may initiate compulsory winding-up proceedings?
… A Creditor
What is a committee of inspection?
A committee of inspection appointed in pursuance of this Act shall consist of creditors and contributories of the company, or persons holding general powers of attorney from creditors or contributories, in such proportions as may be agreed on by the meetings of creditors and contributories, or as, in case of difference, may be determined by the court.
