ZIMBABWE EZEKIEL GUTI UNIVERSITY

FACULTY OF COMMERCE
ASSIGNMENT SUBMISSION FORM
SECTION A
STUDENTS NAMES: SHAMISO CHAKOMBERA R211582C
BEAUTY MUDEKWE R211580C
LAIFORD MAFAUNE R211639C
JOEL CHABUNE R211181C
WIMBAI CHABUME R211581C
RUFARO DANDAJENA R211479C
ELIZABERTH MUSODZA R211579C

COURSE: COMPANY LAW CODE: CAC213

QUESTION: EXPLAIN VOLUNTARY WINDING UP AND ITS EFFECTS.B.REASONS
FOR COMPULSORY WINDING UP,C REQUIRED IN RELATION TO COMPANY
LAW,ADVISE THE THREE FAMERS ON THE TYPE OF INCORPORATED
ASSOCIATION BEST SUITED TO THEIR NEEDS,HIGHLIGHTING THE
ADVANTAGES AND DISADVANTAGES OF AN INCOPORATION AS COMPARED
TO A PARTNERSHIP GROUP 2
LECTURER: Mr MUKETSI
Due Date: 26 September 2022

SECTION B
LECTURER'S
COMMENTS: .............................................................................................................................
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Mark: ................................................................................................................................
Signature: ..........................................................................................................................

VOLUNTARY WINDING UP AND ITS EFFECTS

A voluntary liquidation is a self-imposed wind-up and dissolution of a company that has

been approved by its shareholders. Such a decision will happen once a company's leadership
decides that the company has no reason to continue operating. Schedule XI Section 2(94A)
of Companies Act1 2013

The purpose of a voluntary liquidation is to terminate a company's operations, wrap-up its

financial affairs, and dismantle its corporate structure in an orderly fashion, while paying
back creditors according to their assigned priority( Joseph Smith Taylor 2010).

Section256.Effect of voluntary winding up.

1)The company shall from the commencement of the winding up cease to carry on its
business, except so far as is in the opinion of the liquidator required for the beneficial
winding up thereof, but the corporate state and corporate powers of the company shall
notwithstanding anything to the contrary in its articles, continue until it is dissolved.

2)Any transferee of shares, not being a transfer made to or with the sanction of the liquidator,
and any alteration in the status of the members made after the commencement of the winding
up shall be void(3/5)

1b)The reasons for compulsory winding up

i)To raise as much funds as needed to pay the creditors

ii)after the company has seized business activities

iii)To terminate the company’s existence by its eventual dissolution

iv)management deadlock

v)to Minimise tax liabilities or maximise tax advantages for the group to which the company
belongs.

v)To ensure a just distribution of the company’s assets among creditors and contributors.

(3/6)
2c)In relation to the company law, advise the three farmers on the type of incorporated
association best suited to their needs, highlighting the advantages and disadvantages of an
incorporation as compared to partnership.

Definition

Incorporated association in company law is a registered legal entity registered with COB
and established for recreational cultural or charitable purposes. It is not for profit
organisations,voluntary,not suitable for community based groups, an inexpensive way to give
associations a legal identity which continues despite any membership changes(Oxford
University press 2015).

TYPES OF INCOPORATED

There are three types of cooperation associates in Zimbabwe namely Private Business
Coporation,Private Limited Company and Cooperative or partnership. As a group we
recommend that the three famers may use the Private Business Cooperation which has more
advantages over the other corporations. Private business corporation is meant for small to
medium business, and can accommodate sole traders and have a maximum of twenty
members. Members are the same as shareholders or owners. Private business cooperation
companies has members as its shareholders. It has an incorporation statement and bylaws,
offers limited liabilities to it owners. There is no prohibition on a private business
cooperation to provide financial assistance of the acquisition of a members’ interest. This
Private business corporation does not have any directors, shareholders or guarantors.

ADVANTAGES OF INCORPORATION

Can operate regardless of changes to its membership

Can accept gifts and donations

Can enter into contract

Can apply for government grants

Have the automatic approval to solicit for charitable donations in the state of Tasmanian

One is able to gain benefits of limited liability

Unless it is specified in the association rules, a member of an incorporated association is not
liable to contribute towards associations debt payments and labialise.

Disadvantages of incorporation

Formalities and expenses

Even after incorporation of the company, it has to be run and managed very strictly. In
accordance with the legal provisions provided by the Companies Act. The returns and other
documents have to be registered at the Registrar of Companies. Certain particular events or
activities such as accounts, corporate audits,meetings,borrowing,lending investment and issue
of Capital,dividentds to mention but a few, are necessarily required to be conducted and
carried out by the provisions of the Companies Act

Corporate disclosure

In spite of the extensive legal framework designed to ensure maximum transparency and
disclosure of corporate information, the employees and low level members of the company
information and higher management

Separation of control from ownership

Members of small shareholders of a company do not have any effective form of control over
the functions and decisions of the company. This happens because the number of people in
the company is so large that an individual or even a small group of people cannot have a big
effect on the working of the organisation, thus the position termed as ownership of the
company is just a term that has no real significance. They do not have any active or complete
control over the companies workings.

Greater social responsibility

Many incorporated companies have a net worth of billions of dollars and thus employ
hundreds of thousands of employees. They have a very huge impact on society and these
companies often take part in social activities that are part of its CRS(Corporate Social
Responsibility)campaigns. Because of the colossal impact, these huge incorporated
companies have, they have to follow certain social norms and contribute to the development
of society.
Greater tax burden in certain cases

As compared to other types of companies, incorporated companies have to pay a higher tax.
An incorporated company does not get any discounts and any minimum taxable limits. An
incorporated company also has to pay income tax on the whole of its income at a fixed rate
whereas other companies are charged at a gradual or slab rate, thus many companies often
start out as private companies or partnership companies. And so, when their scale of grows
larger, they become an incorporated company(Evans Brothers, 1997).

Detailed winding up procedure

The Companies Act provides for a detailed and lengthy process to explain the winding up of
a company. This process is a lot more time consuming and expensive as compared to the
same process for other types of companies.

PARTNERSHIP

A partnership is a formal arrangement by two or more parties to manage and operate a

business and share its profits.

There are several types of partnership arrangements. In particular, in a partnership business,

all partners share liabilities and profits equally, while in others, partners may have limited
liability. There also is the so-called "silent partner," in which one party is not involved in the
day-to-day operations of the business. These partners do not register to any legal board, but
Private business cooperation’s do register with the company of registration.Therefore,this
group advise the famers to register through the Private Business Corporation because of
these various reasons.

Private business corporation is meant for small to medium business, can accommodate sole
traders and have a maximum of twenty members. Members are the same as shareholders or
owners. Private business cooperation companies can not be shareholders or hold a member
interest but only individuals. It has an incorporation statement and bylaws, offers limited
liabilities to it owners. There is no prohibition on a private business cooperation to provide
financial assistance of the acquisition of a members’ interest. This Private business
corporation does not have any directors, shareholders or guarantees.(Jordan & Sons, 2000.)

(9/14)
TOTAL: 15/25

References

[1] Derek French, Applications to wind up companies, Oxford University press 2015.

[2] Joseph Smith Taylor,W. Amer, A manual on the winding up of companies by the court of
chancery , 2010.

[3] C.S. Ola, Companies winding up rules ,Evans Brothers, 1997.

[4] Sir Francis Gore- Browne, William Jordan, Management and winding up of a companies,
[5] Jordan & Sons, 2000.

[6] Avatar Singh Sixteenth edition, Company Law, Eastern book company .

[7] Court application under the companies Act, Bloomsbury professional Maxwelton House.
[8] The companies winding up practice , Britain laws statutes Etc., Fb & C Ltd, 2018.

[9] Ratan Nolakha , Company law and practice, Vikas Publishing house.

[10] Frank Hortin Callaway, Winding upon the just and equitable ground, Law Book
Company, 1978.