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Winding Up and Dissolution of Business and Non-Business Organization in Nigeria: Principles and Procedures

Winding Up and Dissolution of Business and Non-Business Organization in Nigeria: Principles and Procedures

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by Akin Olawale Ogundayisi LL.B, B.L, ACIArb.
by Akin Olawale Ogundayisi LL.B, B.L, ACIArb.

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Categories:Types, Research, Law
Published by: Akin Olawale Oluwadayisi on Mar 28, 2012
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07/17/2013

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WINDING-UP AND DISSOLUTION OF BUSINESS AND NON-BUSINESS ORGANIZATION IN NIGERIA: PRINCIPLES ANDPROCEDURE
By Akin Olawale Ogundayis LL.B, B.L, ACIArb.
INTRODCUTION
 
Winding up is the process whereby the company is liquidated and dissolved and itsassets administered for the benefit of creditors, members and employees. The winding-up process terminates the corporate identity of a company and all its attribute of perpetual succession, which is one of the ways to dissolve a registered company underthe Act. Upon winding-up of a company or the appointment of liquidator, it does notexist any longer except for a just cause.It should be noted that a company wound-up is not dead for it is still alive; it only dieson dissolution. See
C. S. (Nig.) Plc v. Mbakwe (2002) 3 NWLR (Pt. 755) 523 at 527 
– 
528.
During the winding-up process, the assets of the company are realized,sold and applied to pay off its debts and whatever is left as the surplus is distributed tothe shareholders in accordance with the provisions of the memorandum and articles of association.
The terms “winding
-
up” and “liquidation” are usually regarded as being synonymous
and are consequently used interchangeably. In
Musa v. Ehidiamhen (1994) 3 NWLR (Pt. 334) 544, 
it was stated that both terms refer to the process whereby an
end is put to the “life” of a company and its property administered for the benefit of its
creditors and members.
JURISDICTION OF COURT
The Federal High Court has jurisdiction to wind up a company. This is becauseCompanies and Allied Matters form part of the items under section 251(1) of 1999Constitution (as amended), which is exclusive of the court. There are certaincircumstances where by administrative institutions or corporations established by laware vested with certain responsibilities in the winding up process. For example, in the
 
winding up of financial institutions that has gone bankrupt or insolvent, the NationalDeposit Insurance Corporation (NDIC) may be involved in the process.
Section 407 CAMA; section 7(1)(c)(g)) Federal High Court Act, Cap F12 LFN 2004.
 
MODE OF WINDING-UP
 
Generally, winding up may be either voluntary or involuntary. It is involuntary windingup where it is initiated by the court by virtue of its statutory power to do so. On theother hand, the members, creditors or contributories of the company may willingly meetwith a view to wind up the company- this is said to be voluntary . Thus, winding upmay be effected by:(a) the court (compulsory); or(b) voluntarily by member; or(c) Subject to supervision of court.See
Section 401 CAMA
 
WHO MAY WIND-UP
 
Depending on the mode of petition, any of the following persons may present or file apetition for winding up, that is:a.
 
the companyb.
 
a creditor, including a contingent or prospective creditor;c.
 
the official receiver,d.
 
a contributory;e.
 
a trustee in bankruptcy to, a personal representative of a creditor orcontributory;f.
 
the Commission (Corporate Affairs Commission) under sections 323,410(2)(d) of CAMA;g.
 
a receiver if authorized by the instrument under which he was appointed,orh.
 
by all or any of the parties, together or separately.
 
See Section 410 of CAMA
It should be borne in mind that Section 32Insurance Act No.1 of 2003provides thatpetition to wind up an insurance company may be presented by not less than 50 policyholders and the National Insurance Commission.
WINDING-UP BY THE COURT
 
 A company may be wound-up by an order of the court. We have mentioned that theFederal High Court has jurisdiction to do so. However, care must be taken in choosingthe appropriate venue of the court where the company registered address is situated.Thus, in
Medicore (Nigeria) Ltd. v. Labwares (Nigeria) Ltd. (1985) FHCR 240, 
a
company’s
registered office is in Ilorin, Kwara State. A petition was brought in a Lagoscourt to wind-up the company. It was held that the court that had jurisdiction to wind-up the company is the court within whose area of jurisdiction the registered office of the company is situated, which is the court in Ilorin. Therefore, the Lagos court wasincompetent to hear the petition. In addition, in
IMB Nigeria Ltd. v. Lomay Nigeria Ltd. (1986) FHCR 28, 
where a petition was brought for convenience in Lagos againsta company whose registered office is in Jos, the petition was struck out.Where a company is being wound-up by the court, any attachment, sequestration,distress or execution put in force against the company after the commencement of thewinding-up shall be void by virtue of section 414.
See 
N.D.I.C v. Ifediegwu (2003) NWLR (Pt. 800) 56.
GROUNDS FOR WINDING-UP
 
The grounds for winding up of a company may defer due to the mode of its winding up.However, there appears to be a common ground applicable to all modes either by thecourt, subject to supervision of court, members volunt
ary or creditor’s voluntary
winding up. The grounds can be any or all or a combination of the following grounds:

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