Answer ... Compulsory liquidation: On the appointment of a liquidator, all powers of the company’s directors cease, except to the extent that the court or the liquidator agrees to their continuance. Any person that subsequently purports to exercise the powers of a director is guilty of an offence.
On the making of a compulsory winding-up order, the company must cease to carry on business except insofar as is necessary for the beneficial winding up of the company. The company’s corporate state and powers continue until its dissolution.
Any transfer of a company’s shares made after the commencement of a winding-up is void, unless it is a transfer made to or with the approval of the liquidator.
A liquidation has no statutory effect on contracts of employment. However, a liquidator is likely to terminate employment contracts as part of the winding up and payments due to employees may attract priority. Commencement of the winding up does not automatically terminate contracts and the company will continue to attract tax liability.
A company is dissolved at the end of a liquidation. Within 15 days of the day of final distribution of the company’s assets, the liquidator must apply to the court for an order declaring that the company is dissolved.
On dissolution, the company cannot undertake any business or contract debts or obligations. Any member of a company who causes the company to do so is personally liable in respect of any debt or obligation undertaken. A company that has been dissolved following liquidation cannot be restored.
Voluntary liquidation: The liquidator realises the company’s assets and discharges the company’s liabilities. Having done so, he or she distributes any surplus among the members according to their respective entitlements. A voluntary liquidator is not controlled by the court.
A company being voluntarily wound up can, by special resolution, delegate to its creditors the power to:
- appoint a liquidator; and
- enter into any arrangement regarding the powers to be exercised by the liquidator and the manner in which they are to be exercised. A creditor or shareholder of a company which has entered into such an arrangement can, within 21 days of completion of the arrangement, apply to the court for an order that the arrangement be set aside. The court can set aside, amend, vary or confirm the arrangement.
A member of a company can also apply to the court for directions concerning any aspect of the winding up.
If a resolution for its voluntary winding up has already been passed, the court can still make an order that the company be compulsorily wound up. This application is unusual but might be made by a creditor that wishes the process to be supervised by the court.
From the commencement of a voluntary winding up, the company ceases to carry on business unless beneficial for winding up the company. The company’s corporate state and powers continue until dissolution.
On the appointment of a liquidator, all powers of the directors cease, except to the extent that the company by ordinary resolution, or the liquidator, approves their continuance. Any person who subsequently purports to exercise any powers of a director is guilty of an offence.
The rules in relation to contracts are the same as in a compulsory liquidation.
As soon as the company’s affairs are fully wound up, the liquidator should both:
- prepare an account of the winding-up, giving details of the liquidation and the disposal of the company’s property, among other things; and
- call a general meeting to present and explain the account.
After the meeting, the liquidator must give notice to the registrar of companies of the holding of the meeting and its date. The registrar of companies publishes the notice along with a statement that the company will be dissolved. The company is dissolved three months after the notice is delivered.
On dissolution, the company cannot undertake any business or contract debts or obligations. Any member of a company who causes the company to do so is personally liable in respect of any debt or obligation undertaken. A company that has been dissolved following liquidation cannot be restored.