COMPANY LIQUIDATION - REFORMS AND RESTATEMENT OF THE LAW
The remit of Working Group D (Insolvency and Corporate Securities) of the Corporate Law Reform Committee (CLRC) is to consider the current law and practice relevant to corporate insolvency. The objective of the review of this area of the law is for the creation of a corporate insolvency framework: * that is facilitative to the winding up of companies where there is no prospect of the business becoming profitable and viable; * that is able to provide an efficient system to rehabilitate companies where appropriate; * that is able to ensure the protection of rights of creditors and members by providing enforcement mechanisms that may be accessed without undue delay or difficulty; * that ensures accountability of the persons involved in the process and transparency of the process itself. This Consultation Paper focuses on the reform and restatement of the liquidation scheme. The laws and procedures on winding up are necessary parts in the operations of a company since the law and procedure will enable proper closure of a company which may not be able to continue its business. The review conducted by Working Group D of the CLRC in relation to the liquidation process starts on the premise that the law and procedures for company liquidation are well-known and familiar to practitioners. Thus, the gist of this structure will be retained. However, in line with simplification of the law, the review focuses on the following areas: (a) Reform and restatement of the law on company liquidation - There are specific recommendations made in relation to the following: * Commencement of winding up and termination of winding up; * Review of void and voidable dispositions, undue preference transactions, effect of floating charges and liquidator’s right of recovery under section 295; * The powers and duties of a liquidator and interim liquidator; * The appointment and qualification of a liquidator and interim liquidator; * The rights of secured creditors;
* Mutual credit and set-off;
* Preferential debts; and
* The deregistration process under section 308 of the Companies Act 1965. (b) Reform and restatement of the liquidation process
(c) Reform and restatement on the law and procedure in relation to company charges. In conducting the review, the CLRC is aware of views that there should be an Omnibus Insolvency Act which would combine both corporate and individual insolvency and operate as a separate legislation from the company legislation. However, even in jurisdictions that adopt this approach, there is still no total fusion between corporate and individual insolvency. The CLRC is of the view that the review exercise should focus on clarification and uniformity of the law and procedure on corporate insolvency in general and company liquidation in particular. Unity of the law on corporate and individual insolvency into a single legislation should not be the overriding concern. One of the means identified by the CLRC on achieving clarification and uniformity of the law is by reducing confusion in the application of the existing framework especially in relation to unnecessary and extensive cross-references to the Bankruptcy Act 1967.
COMPANIES ACT 1965 (REVISED - 1973)|
PART X - WINDING UP|
DIVISION 3 - VOLUNTARY WINDING UP|
Subdivision (3) - Provisions applicable only to Creditors' Voluntary Winding up| |
Section 261. Liquidators.|
(1) The company shall and the creditors may at their respective meetings nominate a person to be liquidator for the purpose of winding up the affairs and distributing the assets of the company, and if the creditors and the company nominate different persons the person nominated by the creditors shall be liquidator, and if no person is nominated by the creditors the person nominated by the company shall be...