The complete procedure for bringing about a lawful termination of a company is divided into two steps- ‘winding up’ and ‘dissolution’. Winding up is the first step in the process whereby assets are released, liabilities are paid off and the surplus, if any distributed among its members. Dissolution is the last stage whereby the company ceases to exist. It can hence be said that there are 3 main steps in the liquidation process:

• Dissolution
• Winding up
• Striking off the Register by the Registrar of Companies

There are 3 forms of dissolution: members voluntary winding up, creditors voluntary winding up and winding up by order of the court. ­

Members Voluntary Winding up: It is the members who by virtue of an extraordinary resolution, place the company into dissolution and consequential voluntary winding up. The Directors of the company are duty bound to look into the current state of affairs of the company and should the assets exceed liabilities within the upcoming 12 month then a declaration of solvency will be formulated and filed with the Registrar, together with a notice of dissolution and a statement of the company’s assets and liabilities and the liquidator then takes over the winding up process.

Creditors voluntary winding up: There may be a scenario where the liabilities exceed the assets and therefore different procedures, pertaining to creditors voluntary winding up, apply. The creditors voluntary winding up is also initiated by the members in those cases in which no declaration of solvency is filed by the directors.

Winding up by the Court: The shareholders may by extraordinary resolution decide that the company is wound up by the court. A company may be dissolved and wound up by the court:

• If the business of the company is suspended for an uninterrupted period of 24 months; or
• The Company is unable to pay its debts, which debts remain unsettled in whole or in part after 24 weeks from the enforcement of an executive title or it is proved to the satisfaction of the court that the company is unable to pay its debts.

On the other hand, the court has the power to order a dissolution in the following cases:

• the number of members of the company is reduced to below 2 and remains so for more than 6 months (this provision does not apply in the case of single member company);
• the number of directors is reduced to below the minimum and remains so reduced for more than 6 months;
• the court is of the opinion that there are grounds of sufficient gravity to warrant the dissolution and consequent winding up of the company; and
• when the period, if any, fixed for the duration of the company by the memorandum or articles expires, or a particular event occurs, as contemplated by the memorandum or articles, and the company has not passed a resolution to be wound up voluntarily.

Liquidation process

Although the law envisages slight differences in the process for the different forms of dissolution, the liquidation process namely involves the closing of the accounts due and submission of financial statements, any other forms due to be submitted to the competent authority, the liquidator is appointed and the company is eventually struck off.

How can novolegal assist?

novolegal has the expertise to provide clients with advice throughout the liquidation process and will inter alia:

• Collaborate with the auditors as well as the liquidators and the competent authorities;
• Prepare the necessary documentation and forms and assist with the required resolutions;
• Assist with any public announcements which are required in a daily newspaper for the purpose of making third parties aware about the liquidation;
• Prepare applications with Registry of Companies and Inland Revenue Department to strike off the company from the companies register;
• Liaise with the competent authorities and follow-up the liquidation process.