A company may be wound up voluntarily in the following ways: (1) by ordinary resolution (unless the articles of association specify otherwise) when the company has achieved what it intended, or has reached the end of its anticipated life; (2) by special resolution – for any reason; (3) by extraordinary resolution, when by reason of its liabilities it cannot continue in business and ought to be wound up. Voluntary winding-up commences on the date of the resolution. The resolution must be published in the London Gazette. The results of the winding-up are: (1) that a company ceases to carry on business except for the purpose of winding-up; (2) that transfers of shares and alterations in the status of members are prohibited, although the liquidator may allow a transfer of shares.
There are two kinds of voluntary winding-up – members’ voluntary winding-up and creditors’ voluntary winding-up. The conduct of a members’ voluntary winding up win depend on whether the directors have been able to make a successful declaration of solvency. This is a Statutory declaration that the company will be able to pay its debts in full within twelve months. It must be made within five weeks before the resolution and must contain a statement of assets and liabilities. A liquidator is appointed by the company. If he is not satisfied that the declaration was properly made, he must call meetings of creditors and the winding-up will then in effect become a creditors’ voluntary winding-up. Where he is happy with the statement he takes over completely and the powers of the directors cease except where he states otherwise. He must call annual meetings of members and account to them, and also a final meeting where final accounts are presented. He then notifies the Registrar of Companies, sending him a copy of the accounts, and after three months the company is dissolved. (The final meeting has to be advertised in the London Gazette.) Where the voluntary winding-up is a creditors’ voluntary winding-up, no declaration of solvency having been made, the company must call a meeting of creditors on the same day as, or on the day after, the resolution. The meeting must be gazetted and the creditors given a statement of affairs and a list of creditors. The creditors may appoint a liquidator as well as the members, but the creditors’ appointment will take preference. The creditors may also appoint a committee of inspection. The company can appoint members to the committee with the creditors’ approval. Everything is then as in a members’ voluntary winding-up except that a final meeting of creditors must be held as well as a final meeting of members. Additional matters applicable to both methods are: (1) that the liquidator must establish the debts of the company; (2) that he may carry on business for the purpose of winding-up but does not become personally liable; (3) that after payment of costs of liquidation, monies are applied first in payment of creditors and anything remaining is distributed to members; (4) that the liquidator settles the list of contributories – this list is prima facie evidence of liability; (5) that dissolution can be deferred where this is thought necessary; (6) that during the course of a voluntary winding-up, a creditor may petition for a compulsory winding-up; a contributory may also petition but the court will not grant it unless there are serious grounds for believing that the winding-up is being carried on fraudulently.
Reference: The Penguin Business Dictionary, 3rd edt.