VOLUNTARY WINDING UP

VOLUNTARY WINDING UP

1. Voluntary winding up either in two ways:

• Members’ voluntary winding up - when the company is solvent
• Creditor’s voluntary winding up – when the company is insolvent

2. Members Voluntary Winding Up

n  The process is triggered by a special resolution of the company’s members in general meeting.

n  It is a member’s winding up where declaration has been made and lodged in pursuant of sec 257 – after declaration of solvency

n  Members in general meeting then appoint a liquidator: s 258.

n  Before a members' voluntary winding up can proceed, the directors must make a written declaration to the effect that they have made an inquiry into the affairs of the company and are of the opinion that it will be able to pay its debts in full, within a period of 12 months after the commencement of the winding up.

n  If the company is solvent and the directors intend making a declaration of solvency, it must be made and lodged with the Registrar before the date on which the notices of the meeting at which the resolution for winding up is to be proposed, are sent out

3. Creditors Voluntary Winding Up

n  A creditors' voluntary winding up is only appropriate when the company is insolvent

n  A creditors' voluntary winding up, despite its name, cannot be initiated by the creditors.

n  A members' voluntary winding up is converted into a creditors‘ voluntary winding up, if the company is insolvent.

n  This occurs in one of two ways.

·         No declaration of solvency

·         After appointment of liquidator by members

n  The liquidator is of the opinion that the company is unable to pay its debts.

4. A voluntary winding up shall commence:

Where a provisional liquidator has been appointed before the resolution for voluntary winding up was passed, and in any other case, at the time of passion of the resolution for voluntary winding up. S 255(6)

5. The resolution may be of two types: s 254(1)

1. Ordinary resolution- it is passed when the articles provide that the company is to be wound up when a specified purpose has been achieved or a specified period has elapsed.
2. Special resolution- it requires no ground for winding up and is used in any other case such as a solvent liquidation.