DEFINITION OF WINDING UP OF A COMPANY
Winding up or liquidation of a company is the ending of a company's life; its property administered for the benefit of its creditors and members. At the end of the winding-up, the company will be dissolved. There are two main types of winding up: compulsory, under and order of the court; and voluntary, under resolution of the company.
VOLUNTARY WINDING UP
In a voluntary winding-up, the members of the company have passed a resolution to wind-up the company. There are two forms of voluntary winding-up:
Members’ voluntary winding-up
Creditors’ voluntary winding-up
Whether it is a members’ voluntary winding-up or creditors’ voluntary winding-up depends on whether the directors hold the opinion that the company is solvent. It is a members’ voluntary winding-up if the directors declared that they hold the opinion that the company is solvent. However, if the directors opined that the company is not solvent, it is a creditor’s winding-up. textbook
Voluntary winding is divided into 2 categories:
Members’ voluntary winding up is the liquidation of a solvent company where the directors have formed an opinion that the company will be able to pay its debts in full within the period of 12 months after the commencement of winding up as stated under section 257 of the CA 1965; and Creditors’ voluntary winding up is a liquidation of an insolvent company where the directors make a declaration stating that the company cannot, by reason of its debts and liabilities, continue its business. A meeting between the company and its creditors must be summoned within 1 month from the date of the declaration.
COMPULSORY WINDING UP
Compulsory liquidation is the winding-up of a company by a court. A petition must be presented both at the court and the registered office of the company. Those by whom it may be presented include: the company, the directors, a creditor, an...
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