MRL3701 - STUDY UNIT 22 - Winding Up Companies Questions with Correct Answers

WINDING UP MEANS Correct Answer essentially the procedure by which a company's assets are sold, its debts are paid, and any money left over is divided amongst the shareholders according to their rights. WINDING UP OF COMPANIES IS REGULATED BY THE FOLLOWING LEGISLATIVE PROVISIONS Correct Answer 1. Section 79 - 81 of the Companies Act 71. Winding up of solvent companies 2. Chapter 14 of the Companies Act. 3. Various provision of the Insolvency Act. MODES OF WINDING UP AND ALTERNATIVES TO WINDING UP Correct Answer Company may be wound up in either of the two ways: 1. By the court 2. voluntarily WINDING UP BY THE COURT Correct Answer Sometimes called compulsory winding up is initiated by an application to court. Application is usually brought by a creditor in the case of an insolvent company and a shareholder in the case of a solvent company VOLUNTARY WINDING UP Correct Answer Initiated by a special resolution of the shareholders. The special resolution has to state whether the winding up is to be conducted by the creditors or by the shareholders, and a voluntary winding up by the company in the case of a solvent company. JURISDICTION OF COURT Correct Answer under S12(1) of the 1973 Act the court which had jurisdiction in regard to winding up was the High Court having jurisdiction over the area in which the company had its registered office or main place of business. WHEN COMPANY MAY BE WOUND UP BY COURT Correct Answer 1. Special Resolution 2. Failure to commence of continue with business 3. loss of capital 4. inability to pay debts lution of external company 6. just and equitable 7.Conversion of voluntary winding up into winding up by court 8. no reasonable prospect of business rescue succeeding 9. termination of business rescue proceedings