Winding up of a Company in Jamaica by T.

Golaub

The Companies Act of Jamaica 2004 provides for two main forms of winding up- members voluntary winding up
usually pursued where the Company is solvent and a creditors voluntary winding up pursued where the Company is
insolvent. Insolvency is determined where the Company’s liabilities prevent it from continuing its business and an
Auditor or Accountant has advised that the assets of the Company and its liabilities are such that the Company is
unable to continue in business. It is in these circumstances that a creditors’ winding up by virtue of an extraordinary
resolution is more appropriate.

The ‘winding up’ procedure commences with a resolution of the members of the Company. There are generally three
forms of resolutions (an ordinary, a special and an extraordinary) which can be pursued by a Company, dependent
on what decision is required to be achieved by the Company and its Members and what is required by the Act. An
ordinary resolution is a resolution passed by the shareholders of a company by a simple or bare majority (for
example more than 50% of the vote) either at a convened meeting of shareholders or by circulating a resolution for
signature. This type pf resolution is reserved for example removal of a Secretary.
A special resolution is a resolution of the Company's shareholders which requires at least 75% of the votes cast by
shareholders in favour of it in order to pass. Both a special and an extraordinary resolution requires a meeting by the
members of the Company to propose the resolution and vote in favour of, or against this resolution. The minimum
notice period of the meeting to propose a special resolution is minimum 21 days. The minimum notice period for an
extraordinary resolution is 14 days.

The winding up of a Company may resolve a members’ winding up by the passing of a special resolution and a
creditors winding up by either a special or extraordinary resolution.

Members Voluntary Winding Up:

The majority of the directors at a general board meeting make a statutory declaration that:-

1. A full inquiry into the affairs of the Company have been made
2. Based on the foregoing, in their opinion the Company can pay its debt in full within 12 months from the
beginning of the winding up

If the Company is unable to pay its debt within 12 months, the Directors are presumed, until the contrary is shown,
that they did not have reasonable grounds for giving the opinion that the Company is solvent and may be liable to a
fine and / or imprisonment.

An Auditors Certificate is also required where the Company holds assets, indicating whether the assets have been

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disposed of by the Company.
If there are assets held by the Company, for the Company to be struck

Where the above is provided, it is together filed at the Companys Office of Jamaica, along with a Form 5 (Notice to
Registrar)

Creditors Voluntary Winding Up:

The first step in this process is to resolve by extraordinary resolution that the Company should be wound up. The
members of the Company are required to meet and vote. At this meeting a liquidator may also be appointed. Please
be advised that even if the members in a creditors’ voluntary winding up choose a liquidator, at the creditors meeting
if the creditors do not agree and choose another liquidator, the members of the Company must oblige.

Procedure- Extraordinary Resolution members meting

1. Notice of the meeting must be given to the members of the Company. This notice must be given minimum
14 days and should state the business of the meeting.

2. Within fifteen days after the passing or making of the resolution a copy must be forwarded to the Registrar
and recorded.

Procedure- creditors meeting

1. Meeting of creditors must be summoned for the day or day following meeting for extraordinary special
resolution for wind up to be proposed- notices can be sent simultaneously.

2. Creditors meeting must be advertised by Gazette and once in the Gleaner

Preparation by members for the creditors meeting:

a. Full statement must be prepared of the position of the Company

b. Full list of the creditors

c. Estimated claim to be laid at the meeting

d. Appoint a member to preside at the meeting

At the meeting:

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 a. Creditors and Company appoints the liquidator for winding up and distribution. Please be advised that the
creditors’ choice takes priority over that of the members and may appoint a committee of inspection to
assist and supervise the liquidator.

b. The resolution once made is with immediate effect and the appointment of the liquidator will in effect cease
all duties of the members of the company.

Following the meeting:

Within 14 days of passing the resolution, the Company must:-
a. Advertise in the Gazette and,

b. Write and inform the Registrar of notice of the passing of the resolution and of the appointment of the
liquidator in its winding up proceedings.
Whether you choose to initiate a members or a creditors voluntary winding up, once a liquidator is appointed the
Company through its members cease to carry on any business and exercise any autonomy over the affairs of the
Company. The liquidator is charged with handling all the affairs of the winding up procedure including that
involving the landlord.

Liability of a Director of a Company in Winding Up Proceedings:

If liquidation is pursued, the Directors duties cease immediately and their only role is to preserve assets.
All directors and officers hold positions of trust and may be held liable for breach of trust in their day to say
operation of the company. They have a fiduciary obligation to the company, its shareholders, its employees, to the
public at large and to its creditors.
When a company is solvent and has no financial concerns, the duties that are owed by the company to its creditors
are fairly limited, i.e., such as duties to repay sums due under the terms agreed.

When a company is insolvent, or is verging on insolvency, there is a shift in the directors' duties and additional
duties arise. The directors' primary duties move from the company's shareholders to its creditors (known as the
“insolvency duties” as set out in West Mercia Safetywear Ltd (in liquidation) v Dodd [1998] BCLC 250).

When the insolvency duties arise, every step that a director takes (or omits to take) should be taken in the best
interests of the whole body of the company's creditors. Failure to act in creditors' best interests can amount to a
breach of their duties and lead to personal claims being brought against them.1

1
Benn Richards, Claims Against Directors in Insolvency Processes for Misfeasance under
the Insolvency Act 1986, s 212, Corporate Rescue and Insolvency, (2014) 3 CRI 121

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Section 264 of the Companies Act specifies public inquiry where there are allegations of fraud against a Director or
Officer of a Company.

More specifically, section 323 and 324 of the Companies Act, states that Claims may be brought by the Liquidator or
a Creditor, or contributor or Trustee of a Company against a Director or Officer, past or present for damages or
criminal liability may be assessed or pursued respectively.
Liability of the Director as to Payment of Taxes:
Each case turns on its own facts. If liquidation is pursued, the Court has discretion to pierce the corporate veil and
determine the criminal or civil liability of its Directors based on their fiduciary duty to the Company. If the day-to-
day decisions and operations of the Company are found to be a breach of this fiduciary duty, liability will attach in
which the Directors may be found to be personally liable.

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 ADOPTED WINDING UP SUMMARY
LEGISLATIVE GUIDE TO WINDING UP PROCESS
(1) Compulsory Winding Up

Grounds: s.220 (a) – (e)

Five in all - most common found at s.220 (d) and (e) – inability to pay debts and the just and equitable ground

Inability to pay debts: s.221 and note s.221 (e) – broad definition – if proved to the satisfaction of the court that the
company unable to pay its debts

Procedure: s.222 – by petition for a winding up order by company, creditors, contributories (in certain circumstances
by the Minister and by the Trustee in Bankruptcy) and note the proviso to s. 222 generally

Commencement: s.227 – on presentation of the petition except where before that resolution passed for a voluntary
winding up

Provisional Liquidator: s.235 – allows court to appoint one after presentation of petition – May be Trustee or any fit
person

Effect of Winding Up Order: s.228-229 – Copy order to be sent to company and Registrar of Companies (ROC) – no
actions allowed against company except by leave of court- (N.B. at common law order operates to terminate
employment of employees and agents of company and the office of directors – their power to act on company’s
behalf ceases )

Appointment of Liquidator : s.234 – power of court to appoint liquidator – may be done at same time as winding up
order – N.B. s.235 – no body corporate may be liquidator – N.B. also events/prohibitions /actions activated by
appointment of provisional liquidator under s.235 or making of winding up order – actions stayed (s.229), statement
affairs due (s.232), custody of company’s property taken (s.239)

Liquidators: s.236 – Trustee becomes provisional liquidator (Different position to that which he may hold under
s.235 above after presentation of petition) – Trustee to summon meetings of creditors and contributories to
determine whether application to be made to court re appointment of another person as liquidator – Court makes
order re appointment and if contributories and creditors differ court decides which – where no liquidator appointed
by court, Trustee becomes the liquidator

Conditions Precedent to Acting as Liquidator: s.237 – applies to other liquidators other than Trustee – cannot act
until notice of appointment sent to Registrar and security given

Report by Trustee : s.233 – where winding up order made Trustee to submit preliminary report to court on
company’s capital, assets liabilities, and if company has failed, causes of failure, whether he is of the opinion that
further inquiry into company desirable – may also make further reports giving his opinion on whether fraud
committed

Notification that Company in Liquidation: s.327

Settlement of list of contributories: s.252

Collection of Assets & Discharge of Liabilities: s.252 – court charged with responsibility but N.B. s.268 (delegation
to liquidator)

Powers of Liquidator: s.241 – some exercised with sanction of court or committee of inspection – all subject to
overall control of court

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Influence of Creditors and Contributories: s.242 – in administration of assets and distribution among creditors,
liquidator to have regard to directions given by resolution of creditors or contributories or committee of inspection.
Liquidator may summon meetings to ascertain wishes and may also apply to court for directions

Administrative Duties of Liquidator: ss.243-245 – to keep proper books with minutes of proceedings at meetings,
etc – to pay money received into court directed bank – not less than twice per annum, to send account of receipts and
payments to ROC

Proving of Debts: s.309

Ranking of Claims: s.310 – as in bankruptcy

Preferential Payments: s.311

Invalidity of Fraudulent Preferences: s.312

Invalidity of Certain Floating Charges: s.314

Winding Up Taking Over 1 Year: s.331 – at intervals liquidator must send statement re proceedings in and position
of liquidation to ROC

Dissolution: s.269 – When affairs completely wound up liquidator may apply to court for dissolution order.
Company dissolved from date of order- within 14 days liquidator to forward order to ROC

Release of Liquidator: s.247 – (see basic description of liquidation process here) – on completion or practical
completion of same, liquidator may apply to ROC to be released

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 (2) Members’ Voluntary Winding Up

Definition: s.277 (4)

Circumstances in which company may be wound up voluntarily: s.272 - in particular by special resolution (s.272 (1)
(b))

Notice of Resolution: s.273 – within 14 days to Gazette and ROC

Commencement: s.274 – on passing of resolution

Declaration of solvency: s.277 – by directors – must be made no earlier than 5 weeks before passing special
resolution and delivered to ROC for registration within that time – must contain statement of company’s assets and
liabilities as at last practicable date before declaration

Appointment of Liquidator: s.279 - by company in general meeting – all directors powers cease except so far as
company in general meeting or liquidator sanctions continuance thereof (Note s. 325 – liquidator may not be a body
corporate)

Notice of Appointment: s.299 – within 21 days to Gazette, daily newspaper, ROC

Effect of Winding Up on Business/Status of Company: s.275 – Company ceases to carry on business save as
required for beneficial winding up

Company Found to be Insolvent: s.282 – if liquidator is of such opinion must summon creditors meeting and present
statement of company’s assets and liabilities

Distribution of Company’s Property: s.296 – subject to provision re preferential payments – property to be applied in
satisfaction of liabilities pari passu and subject to articles, distributed among members in accordance with their
rights and interests in company

Powers of Liquidator: s.297 – some powers exercisable with sanction of extraordinary resolution of company

Winding Up Continues for More Than 1 Year: s.283 – liquidator must summon general meeting of company at end
of 1st year or within 3 months from them and each succeeding year and present account of acts and dealings and
conduct of winding up during year
s.331 – liquidator must send statement to ROC containing
particulars with respect to proceedings in and position of liquidation

Proof of Debts: s.309

Costs of Winding Up: s.302

Ranking of Claims: s.370

Preferential Payments: s.311

Fraudulent Preferences: s.312

Floating Charges: s.314

Notification that Company in Liquidation: s.327

Final Meeting and Dissolution: s.284 – when affairs wound up, liquidator to make up account of winding up
showing how conducted and property of company disposed of. Copy account and return of meeting sent to ROC
(N.B. procedure for calling meeting set out) – on receiving account and return, ROC registers them – on expiration

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of 3 months from registration of return company dissolved

(3) Creditors’ Voluntary Winding Up

Definition: s.277(4)

Circumstances in which Company may be So Wound up: s.272(1)(c) – extraordinary resolution – by reason of
liabilities advisable to wind up – insolvent

Notice of Resolution: s.273 – within 14 days – notice by advertisement in gazette and in writing to ROC

Commencement: s.274 – upon passing of resolution

Meeting of Creditors: s.287 – company to cause creditors meeting to be summoned for day or day following meeting
to pass resolution to wind up – notices to creditors to go same time notices of meeting of company – notice of
creditors meeting to be advertised in Gazette and daily newspaper – full statement of company’s affairs and list of
creditors and established amount of their claim to be laid before meeting of creditors by directors

Appointment of Liquidator: s.288 – creditors and company nominate person to be liquidator – if different persons
nominated the creditors nominee shall be liquidator subject to right of any creditor, director or member of company
to apply to court for an order directing that nominee of company should be liquidator or act jointly with creditors’
choice of liquidator or that someone else altogether should be liquidator- remuneration of liquidator fixed by
committee of inspection (if there is one) or by creditors ( if there is none)(s.290)

Appointment of Committee of Inspection: s.289 – meeting of creditors (either 1st one or subsequent meeting) may
appoint 5 persons on a committee of inspection – if so appointed, company may , either at meeting where resolution
passed or at subsequent meeting, appoint up to 5 persons as members of committee – creditors can object to
company appointees subject to direction of court – same rules apply to this committee as to one in a compulsory
winding up (s.249)

Powers of Directors: S.290 – cease on appointment of liquidator except so far as committee, or if no committee, the
creditors, sanction continuance

Powers of Liquidator: s.297 – Same as in members’ voluntary winding up except some powers exercised with
sanction of court or committee instead of company in general meeting

Distribution of Company Property: s.296

Costs of Winding Up: s.302 – constitute pre-preferential debts -payable out of assets of company in priority to all
other claims

Proof of Debts: s.309

Preferential Payments: s.311

Fraudulent Preferences: s.312

Floating Charges: s.314

Notification That Company in Liquidation: s.327

If Winding Up Continues for More Than 1 Year: s.302 – In addition to calling meeting of company must also call
meeting of creditors to lay account before them and do same as for members voluntary under s.283 (see also s.331 –
information as to pending liquidations)

Final Meeting and Dissolution: s.294 – when affairs wound up liquidator makes up account of winding up, calls
general meeting of company and creditors meeting to lay account before them and give explanations (NB procedure

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for calling meetings) – within one week of meetings liquidator to send ROC copy of account and return of meetings.
On receiving account and returns ROC registers them and 3 months thereafter company deemed dissolved.

2012. 03. 14

Cameal Neal slides on winding up

The 14 days notice is for the extraordinary and 21 days for the special resolution – page 6 of slide

Firstly – liquidation/winding up
The process whereby we terminate the life of a company; a corporate person was born so termination
requires that formalities be observed upon its termination.
Secondly – liability to members in a winding up
If limited by shares – limited by unpaid shares; limited by guarantee - limited to the amount guaranteed; if
limited by guarantee with a share capital – limited to both unpaid shares and amount guarantee.
Thirdly – what must exist for a court to do a winding up?
 Company is unable to pay its debts – what evidence will the court use s221
o Company indebted to a creditor in the sum of $500k and creditor served notice of
payment and company unable to pay the sum after 3 weeks
o Judgment decreed against the company and bailiff could only partially satisfy the debt
o Contingent and prospective liabilities of the company
 Company no longer wants to continue the business
 Just and equitable – forms a very significant part of persons who petition the court
o Look to case law for just and equitable examples include
 Deadlock between members
 Directors are also controlling shareholders and are mismanaging the company –
213a
 Loss of mutual trust and confidence between members
Fourthly - who has the locus standi
 Creditors
 Contributors
 Company – the directors acting for the company passes resolution; (singly or jointly)

S340 (1) – UK 1949 Winding Up Rules apply

Fifthly – how should the Petition be brought?
 The Winding Up Rules dictate the procedure
o Rule 26 – states how the Petition should be done
o Rule 28 – service and publication of the Petition

Sixthly – winding up by the court

 The Trustee in Bankruptcy is official Liquidator
 when the court makes the order the court may make an order that a statement of affairs be sworn to and
served on the Trustee in Bankruptcy
 After receipt of S of A – starts proceedings for winding up
o Take into custody and control all assets
o Advertise for creditors

Seventhly – voluntary winding up

 3 types of voluntary winding up
1.
2.
3.

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  Procedure

ADOPTED NOTES ON :***LIQUIDATION**

(I) DEFINITION
The process by which:
1. the assets of a company are collected in and realized,
2. its liabilities discharged and
3. net surplus if any distributed to the person entitled to it.

Only when this is done is the company’s existence terminated by the process called
dissolution.

(II) TIMES WHEN LIQUIDATION MAY OCCUR

Company can be either solvent or insolvent on winding up.
(a)Solvent
(b) insolvent

(III) TYPES OF LIQUIDATION

- [Companies Act S 214]

(1) Voluntary S272

(2) By Court Supervision
(3) By order of the Court

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 MEMBERS VOLUNTARY WINDING UP

SOLVENT COMPANY
If the company is solvent then a special resolution must be passed by a majority of the members
at a extra-ordinary general meeting of which no less than 21 days notice was given specifying the
intention to propose the resolution as SR – S138(2)

definition
the company is able to pay its liabilities/debts as they become due. The debts are liquidated
debts.

How does the court define debt?

The Court looks at the liquidated debts i.e. a set amount that is to be paid or can be ascertained
by simple arithmetic.

TESTS TO DETERMINE SOLVENCY

(1) Cash Flow test
“As they become due”
Statue requires that the company should be able to pay its debts w/in 12 months as they become
due.

NB: if the creditor has a 5 year contract with the company and it has defaulted for 2 months, the
creditor cannot claim for the remaining years now unless there is a clause in the contractual
arrangement, as this would be a future debt. Thus it can’t be factored into company’s solvency,
unless if it is called it can be paid w/in 12 months of becoming due.

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(2) Balance Sheet test
Assets vs. liabilities – whether the assets outweigh the liability. If the assets are greater than
liabilities, then the company is solvent.

Problem
Determining what are assets. These are not assets:
1. trusts assets
2. company has assets subject to hire purchase or lease.

NB: you must sort out the assets in order to have a members winding up.

REASONS TO RECOMMEND THIS TO THE CLIENT

1. company formed for a fixed period or transaction

--wind up when transaction passes
2. company was established but never active
declare
(i) no trading – annexed returns
(ii) company has no assets, liabilities, no shares issued
3. decision can be taken by members to wind up – special resolution
--company is still solvent

STEPS TO WIND UP

(1) call members meeting to pass:

(i) ordinary resolution
 company formed for a fixed period stated in the articles which has
expired or the occurrence if an event provided for in the articles
 Passed by simple majority of those present and voting

(ii) special resolution; or

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  any other circumstance
 ¾ or more of the persons present and entitled to vote

Note
 This is an extra-ordinary general meeting
 Notice is given by company secretary on the company’s behalf or whoever

(2) Proof of solvency or insolvency

 S277 Declaration of Solvency -
(1) Where it is proposed to wind up the company, the director(s), at a director’s
meeting will make a statutory declaration, signed by them, stating that that they
have made a full inquiry into the company’s affairs, and that, they have formed
the opinion that the company will be able to pay its debts in full within less than
12 months from the commencement of the winding
--directors should make their decision based on financial statements supported by
audited reports speaking directly to company’s solvency.

NB: the directors in making the declaration have to be accurate, otherwise they
face criminal penalties for making a declaration when they had no reasonable
grounds for doing so. If the company is wound up w/in 5 weeks after the
declaration was made a rebuttable presumption arises that the directors did not
have reasonable grounds for making the declaration initially: S 277(3)

(2) A declaration made shall have no effect for the purposes of this Act unless—
(a) it is made within the five weeks immediately preceding the date
of the passing of the resolution for winding up the company and is
delivered to the Registrar for registration before that date; and
(b) it embodies a statement of the company’s assets and liabilities as at
the latest practicable date before the making of the declaration.

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 (3) If winding up occurs after the declaration, this is a “member’s voluntary
winding up”; if the declaration is not made, and winding up occurs, this
is a “creditor’s voluntary winding up”.

NB: at the time the declaration is made the resolution for winding up has not yet been
passed.

(3) Notice of resolution passed - S273 (1)

Once resolution is passed then w/in 14 days after a notice of the resolution should be
given by:
(i) Advertisement in the gazette
(ii) a certified extract of the minutes of the resolution passed should be sent to the
registrar.
-- show on the face of extract that it is certified by chairman etc.

(4) Appointment of liquidator

--done at this members meeting or later by the chairman. L’s remuneration will be set
or mechanisms put in place to determine this: S279

NB: A body corporate shall not be qualified for appointment as liquidator of a

company: S 325.

Notice of appointment
S299.—(1) The liquidator shall, within twenty-one days after his appointment,
publish in the Gazette and in one daily newspaper printed and circulating in the
Island, and deliver to the Registrar for registration a notice of his appointment in the
prescribed form.

(5) Director’s Powers - S279 (2)

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 Upon the appointment of L, all directors’ powers cease except so far as the company
in a general meeting or the liquidator sanctions.
--the directors still has his duties to file various statutory returns.

DUTIES OF THE LIQUIDATOR IN MEMBERS WINDING UP

(A) COLLECT AND

DETERMINE THE COMPANY’S ASSETS

Assets to which creditors are entitled

Only property to which the company is beneficially entitled is available to the creditors.

So can’t touch:
(i) trust property: Barclays Bank v Quistclose Investments Ltd 1970
(ii) fixed charge assets

(B) PAY DEBTS

Pay the creditors as recorded in the company’s records.

(C) ORDER OF PAYMENT OF DEBT IN ACCORDANCE WITH THE STATUTORY

SCHEME – S 311

1. pre-preferential creditors
(i) remuneration for receiver, liquidators
(ii) expenses incurred in receivership, liquidation e.g. legal fees, auctioneer fees,
real estate agent

2. preferential creditors – statutory list (S311)

(i) government taxes payable w/in 12 months prior to commencement of
liquidation

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 (ii) company employees wages and salaries up to 4 months prior to institution of
liquidation
(iii) Compensation which Accrued under the Workman Compensation Act, unless
otherwise provided
(iv) NIS contributions
(v) Redundancy payments
(vi) NHT contributions

NB: if L can pay these out of all the assets then things are o.k. if the assets are short after L pays
himself then he will have to pay the preferentials Pari passu.

3. unsecured creditors
--paid out of the general assets of the company. If after the preferentials are paid and
there is no money to pay them, then they will take pari passu.

296. Subject to the provisions of this Act as to preferential payments, the property
of a company shall, on its winding up, be applied in satisfaction of its liabilities
pari passu, and, subject to such application, shall, unless the articles otherwise
provide, be distributed among the members according to their rights and interests
in the company.

Floating charge
This is a secured creditor and operates upon crystallization where the contract will state
that it should take effect upon W.U.
 Will rank ahead of the Liquidator’s expense where the charge
crystallizes on the entry of the receiver, before liquidation occurs. However the
charge is still subject to the pre-preferential and preferential creditors.
 This charge will be subject to liquidation expenses once it
crystallizes on liquidation:
302. All costs, charges and expenses properly incurred in the winding

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 up, including the remuneration of the liquidator, shall be payable out of
the assets of the company in priority to all other claims.

Conversion of members’ winding up to creditors

S 282.—
(1) If, in the case of a winding up commenced after the appointed day, the liquidator is at any
time of opinion that the company will not be able to pay its debts in full within the period stated
in the declaration under section 277, he shall forthwith summon a meeting of the creditors, and
shall lay before the meeting a statement of the assets and liabilities of the company.

(D) ANY SURPLUS MUST BE

RETURNED TO THE MEMBERS.

NB: if the liquidator seeks to carry on the business then it must only be if it is beneficial for the
winding up process.
--it should be expected to produce better returns for the creditors but not with the aim to
resuscitate the business: RE Great Eastern Electric Company 1940

(E) DISSOLUTION

Final meeting and dissolution

284.—
(1) as soon as the affairs of the company are fully wound up, the liquidator must:

(i) make up an account of the winding up, showing how the winding up has
been conducted and the property of the company has been disposed of,
and

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 (ii) then call a general meeting of the company for the purpose of laying
before it the account, and giving any explanation thereof.

(2) Within 1 week after the meeting, the liquidator must send to the Registrar a copy
of the account, and must make a return to him of the holding of the meeting and
of its date

(3) The Registrar should on receiving the account and either of the financial returns
register them, and after 3 months from the registration of the return, the company
shall be deemed to be dissolved:

(4) The registrar will then issue a certificate of dissolution / W.U.

(5) Then a notice will be placed in the newspaper that the company is wound up.
CREDITORS VOLUNTARY WINDING UP

COMPANY’S STATUS
If no declaration of solvency is filed with the Registrar w/in the period, the winding up proceeds
as a creditors’ winding up and this is so even if the company is solvent and can pay its debts in
full. However the company is usually Insolvent and so is unable to pay it debts as they become
due and payable.

PROCEDURE
Meeting
(I) An extra-ordinary general
members meeting is convened to pass an extraordinary resolution. 14 days notice must
be given to the members by the company of the intention to pass a EOR at the meeting -
S138(1)

(II) 287.—(1) The company will

then call a meeting of the creditors for the same day, or the following day, on which the
members meeting was held to pass the resolution.

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 (III) Notices of the creditors meeting is sent out by post to the creditors simultaneously
with the sending of the notices of the meeting of the company.
--The notice of the creditors’ meeting should be published in the gazette and other
newspaper. The Registrar will also be informed.

(IV) A creditor’s meeting will be

held at which a director should preside. - S287
The director will cause a full statement of the position of the company’s affairs
together with a list of the creditors of the company and the estimated amount of
their claims to be laid before the meeting of creditors to be held as aforesaid;

Appointment of the liquidator – S288

Nominations for L will be done at the respective members and creditor’s meeting. If the persons
nominated are different then the creditor’s nomination shall be appointed by the company
passing a resolution to that effect. If the creditors did not nominate, then the company’s nominee
will become creditor via the passing of a resolution.

NB: the creditors, if there is no committee of inspection, may fix L’s remuneration: S 290

DIRECTORS POWERS
S290 (2) all the powers of the cease except so far as the Committee of inspection, creditors
sanction the continuance.

COMMITTEE OF INSPECTION
S 289
The creditors at their meeting or a subsequent meeting may appoint a C.O.I of not less than 5
members. If the creditors fail to appoint the committee, then the company can do so at the
meeting held to pass the resolution for voluntary winding up or a subsequent meeting.

NB: Creditors have the discretion to decline the persons nominated by the Company.

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 DUTIES OF THE LIQUIDATOR IN CREDITORS’ WINDING
UP

(1) SETTLE LIST OF CONTRIBUTORIES

Contributories
215.—(1) In the event of a company being wound up, every present and past member
shall be liable to contribute to the assets of the company to an amount sufficient for
payment of its debts and liabilities, and the costs, charges, and expenses of the winding
up, and for the adjustment of the rights of the contributories among themselves, subject
to qualifications—

216. The term “contributory” means every person liable to contribute to the assets of a
company in the event of it being wound up..

2 categories
(1) those members at date of commencement of w.u
(2) those members 6 mths prior

(2) COLLECT AND DETERMINE THE COMPANY’S

ASSETS
Rule
On liquidation all the company’s assets form a common fund, which subject to the expenses of
winding up and the rights of the preferential creditors, are subject to a statutory trust for the
benefit of the unsecured creditor: Webb v Whiffin (1872)

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Secured creditor
--rely on their security

Unsecured
S296. Subject to the preferential payments, the company’s property shall, on its winding
up, be applied in satisfaction of its liabilities pari passu, and, should be distributed among
the members according to their rights and interests in the company, unless the articles
otherwise provide.

Shrinking the assets

Any arrangement which seeks to spirit away available assets at insolvency so that it does not fall
in the general pool of assets will be deemed as void: Money Markets International Stockbroker
Ltd v London stock exchange 2001.
--but an arrangement where a creditor decides to subordinate its claim until such other unsecured
creditors are paid, is allowed as it does not result in the shrinkage if the assets: Re Maxwell
Communications Corp 1994

Assets to which creditors are entitled

Only property to which the company is beneficially entitled is available to the creditors.

(3) PAY DEBTS

--L will ask the creditors to submit their debt claims.

Procedure
 Creditor will submit an affidavit to L outlining debt owed and submitting proof
 L will look at his company records and the claims and determine the validity of the same.

Powers of L
L can refuse to honour a debt b/c it is:
(i) non- existent
(ii) nature of the transaction makes it questionable.

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 NOTE
 it is usually those liable to be paid from the general fund that need to prove their debt. The
secured creditor can rely on his charge. However he can surrender their security and prove
for the whole amount.

(4) PAY DEBTS TO THE CREDITORS IN ACCORDANCE WITH THE STATUTORY

SCHEME
1. pre-preferential creditors
(i) remuneration for receiver, liquidators
(ii) expenses incurred in receivership, liquidation e.g. legal fees, auctioneer fees,
real estate agent

2. preferential creditors – statutory list (S311)

(iii) government taxes payable w/in 12 months prior to commencement of
liquidation
(iv) company employees wages and salaries up to 4 months prior to institution of
liquidation
(v) Compensation which Accrued under the Workman Compensation Act, unless
otherwise provided
(vi) NIS contributions
(vii) Redundancy payments
(viii) NHT contributions

NB: if L can pay these out of all the assets then things are o.k. if the assets are short after L pays
himself then he will have to pay the preferentials Pari passu.

3. unsecured creditors
--paid out of the general assets of the company. If after the preferentials are paid and
there is no money to pay them, then they will take pari passu.

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 296. Subject to the provisions of this Act as to preferential payments, the property
of a company shall, on its winding up, be applied in satisfaction of its liabilities
pari passu, and, subject to such application, shall, unless the articles otherwise
provide, be distributed among the members according to their rights and interests
in the company.

Floating charge
This is a secured creditor and operates upon crystallization where the contract will state
that it should take effect upon W.U.
 if there is not enough assets to fill all the claim , then the
unfulfilled part will make him an unsecured creditor and he will be share pari
passu with the other creditors.
 Will rank ahead of the Liquidator’s expense where the charge
crystallizes on the entry of the receiver, before liquidation occurs. However the
charge is still subject to the pre-preferential and preferential creditors.
 If liquidation has occurred then the charge will be subject to
liquidation expenses:
302. All costs, charges and expenses properly incurred in the winding
up, including the remuneration of the liquidator, shall be payable out of
the assets of the company in priority to all other claims.

(5) GIVE REPORT OF LIQUIDATION PROCESS.

(1) Must give a final report after the company is fully wound up : S 294(1)
As soon as the affairs of the company are fully wound up:

(i) the liquidator shall make up an account of the winding up, showing
how the winding up has been conducted and the property of the
company has been disposed of, and
(ii) thereupon shall call a general meeting of the company and a meeting
of the creditors, for the purpose of laying the account before the
meetings, and giving any explanation thereof.

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NB: Call members or creditors’ meeting for clarification

(F) DISSOLUTION
Creditors
294.—(1) as soon as the affairs of the company are fully wound up, the liquidator must:

(i) make up an account of the winding up, showing how the winding up has
been conducted and the property of the company has been disposed of,
and
(ii) and shall call a general meeting of the company and a meeting of the
creditors, for the purpose of laying the account before the meetings, and
giving any explanation thereof.

(2) Each such meeting shall be called by advertisement in the Gazette and in one daily
newspaper printed and circulating in the Island specifying the time, place, and object thereof, and
published one month at least before the meeting.

(3) Within 1 week after the meeting, the liquidator must send to the Registrar a copy of the
account, and must make a return to him of the holding of the meeting and of its date

(4) The Registrar should on receiving the account and either of the financial returns register
them, and after 3 months from the registration of the return, the company shall be deemed to be
dissolved:

COMPULSORY (COURT) WINDING UP

APPLICANT – S 212
(a) a shareholder or former shareholder

(b) a debenture holder or former debenture holder

(c) a director or officer or former director or officer

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 222.—(1)
An application to the Court for the winding up of a company shall be by petition,
either by
(i) the company, or
(ii) by any creditor or creditors
(including any contingent or prospective creditor or creditors)
NB: brought by the prospective creditor relying on the balance sheet test.
(iii) contributor(s) [members] , or
(iv) by all or any of those parties, together or separately:
(v) trustee

NB: contributory shall not be entitled to present a winding up petition unless his shares or some
of them, either were:

(i) originally allotted to him or have been held by him, and registered in his name, for at
least
6 months during the 18 months before the commencement of the winding up, or

(ii) have devolved on him through the death of a former holder;

GROUNDS – S220

(a) a special resolution is passed by the company that it

be wound up by the Court;

(b) default is made in delivering the statutory report to the

Registrar or in holding the statutory meeting;

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 (c) the company fails to commence its business within a
year from its incorporation, or suspends its business for a
whole year;

(d) the company is unable to pay its debts;

(e) the Court is of opinion that it is just and equitable that

the company should be wound up
- SH, director may bring this

NB: winding up can only be commenced on the provision of a court order.

COMMENCEMENT OF WINDING UP
S227 states that if a resolution was passed prior to the petition to wind up voluntarily, then the
passing of the resolution is the commencement of the W.U.

APPOINTMENT OF LIQUIDATOR AND TRUSTEE IN BANKRUPTCY

L is an officer of the court and is answerable to the Court only.

S234. For the purpose of conducting the proceedings in winding up a company and performing
such duties in reference thereto as the Court may impose, the Court may appoint a liquidator or
liquidators.

S 235 (1) (2) –

the court appoints the liquidators who may either the Trustee or any other fit person.

236.—
(1) once the order is made then:

(a) the Trustee by virtue of his office becomes the provisional liquidator and shall continue to
act until another is appointed

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(2) The Trustee may charge such fees for duties carried out by him as provisional liquidator as
prescribed by the Minister

DIRECTORS POWERS
The directors are automatically dismissed from office.

COMMITTEE OF INSPECTION
248.—(1)
After the Court has made a winding up order then the creditors and contributories in their
respective meetings should decide:
(1) if a liquidator should be appointed instead of trustee; and if
(2) if a committee of inspection is to act with the liquidator –the committee
would comprise of members of the company.

249.—(1)
The committee of inspection must consist of creditors and company contributories or persons
holding general powers of attorney from

S250.
if there is no committee in W.U, L may apply to the Minister for permission or directions that the
committee would have had to give.

DUTIES
(1) Collect assets
(2) Call in debts
(3) Pay debt
(4) Distribute surplus to members
(5) Give report of liquidation process.

COURT SUPERVISED WINDING UP

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Occurs where the members and creditors are at variance and they ask the court to intervene.
--the creditor or members, in the process of voluntary liquidation, request that the remainder of
liquidation be court supervised.

HOW INITIATED
By petition to the Court – S305

APPOINTMENT OF LIQUIDATOR
A liquidator would have already been appointed but the court can appoint an additional
liquidator: S 307(1)

DIRECTORS POWERS
Role is strictly the preservation of the assets

(IV) CHANGES IN
LIQUIDATION
S 275.
from the commencement of the winding up, the company ceases to carry on its business,
except as may be required for the beneficial winding up thereof:

Statement on all documents the liquidation is occurring -S327

327.—(1)
Where a company is being wound up, whether by or under the supervision of the Court or
voluntarily, every document issued, which has the company name thereon, by or on behalf of the
company or a liquidator, a receiver, or manager of company property being a must contain a
statement that the company is being wound up.

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