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Winding Up

Voluntary Winding Up Compulsory Winding Up

Meaning of Winding Up
A process where a company is dissolved Where the business is closed down, all assets are sold off to pay the creditors, balance goes to the members - company ceases to exist Also known as liquidation

Types of Winding Up Voluntary Winding Up Compulsory Winding Up .

Voluntary Winding Up Members’ VWU Creditors’ VWU .

Members’ Voluntary WU (Liquidation of a solvent company) Sec 254(1)(b)-Company’s members in general meeting pass a special resolution Sec 257 – Declaration of Solvency Sec 258 – members appoint a liquidator .

The creditors may nominate the liquidator . Sec 261 .Creditors’ Voluntary WU (Liquidation of an insolvent company) Sec 259 – The liquidator shall summon a creditors meeting when he is in the opinion that company is insolvent instead of solvent as been declared by the directors under sec 257. Sec 260(1) – To summon meeting of the company’s creditors the same day or the following day-issuance of notice.

.Other matters Effect of voluntary Winding up: Sec 256 (1)– From the commencement of the winding up the company cease business but the corporate state and corporate power continues until it is dissolved.

The court may order winding up if the circumstances of the company is within those listed in Sec 218(1) (a) – (n) .Compulsory Winding Up Application can be made to the court by those persons listed in Sec 217 .

Re National Discounts Ltd H: If directors act in the interests of another company which they control. they can be said to be acting in their own interests .Common grounds for CWU Sec 218(1)(f) – directors acted in their own interests or in a manner which is unfair to members.

communicate through the company secretary. Could not get along. though company made profit . H: Order winding up.Court is of opinion it is just and equitable i) Deadlock Re Yenidje Tobacco Co Ltd F: R & W – shareholders and directors of a company.Sec 218(1)(i).

One of them petitioned for winding up.Re Semantan Estate Ltd F: Two permanent directors were not on speaking term. The company could still be carried on and there was a reasonable hope of reconciliation. COA: Refused to order winding up. .

. H: Allowed the petitioned. The members petitioned for winding up.ii) Fraud or misconduct Loch v John Blackwood Ltd F: Directors failed to provide the minority members with financial reports as required by the law.

Failed to acquire the patent for that purpose.iii) Object of the company cannot be achieved Re German Date Coffee Co F: The company was formed to manufacture a coffee substitute out of dates. H: The company was wound up because it was set up for a specific purpose and that purpose failed to be achieved. .

One of the theatres was damaged by fire. H: Company was wound up on the ground of just and equitable. The theatre and the land were sold and the money was used to purchase shares of other companies. Members objected.Re Tivoli Freeholds Ltd F: The object of the company was to carry on entertainment business. .

E petitioned for winding up. Ebrahimi v Westbourne Galleries Ltd F: N & E – both directors & shareholders. H: Company was wound up. . Father & son controlled the company. N’s son joined the company. Removed E from directorship.iv) Petitioner has been excluded from the management in contravention of an understanding.

Sec 218(2)(a) – a company is presumed to be insolvent if it fails to comply with a statutory demand ( debt worth at least RM500 payable within three weeks after issuance of the statutory demand) .

Appointment of liquidator For Compulsory WU-Sec 227 Provisional Liquidator-sec 231 .

. A voluntary winding up commenced : 255(6)(a) – upon appointment of provisional liquidator [refer to sec 255(1)] 255(6) (b).Commencement of winding up A compulsory winding up: sec 219(2).at the time of passing of the resolution .is deemed to commence at the time of presentation of the petition for winding up.

unless the court order otherwise-sec 223 Cannot enforce judgment or orders they obtained after commencement of wu.Effect of winding up Creditors After commencement.sec224 . any disposition of company’s property other than made the liquidator is void.

Company For voluntary WU.sec 256(1) For Voluntary WU-Transfer of shares are voidsec 256(2) .Legal entity continue to exists after commencement of wu but it is prevented from carrying on business except for the purpose of wu..

In both voluntary and compulsory wu.Re Farrow Bank Ltd [1921] 2 Ch 164 .Members lose their right to transfer shares with the commencement of wu-sec 223(1) . the directors lose their power to manage the company’s affairs.

Ltd [1962] VR 262 . (1872) 7 Ch App 646 For voluntary wu.Employees For compulsory wu. the publication of the wu order serve as a notice of dismissal to the company’s employees-Re General Rolling Stock Co. the order does not necessarily operate to dismiss the company’s employee – Re Matthew Bros.

.Other matters All documents issued by the company while the company in a wu process must have the words “in liquidation” set after its name-sec 283.

Winding up sec 217-313 Compulsory Sec 217-253 Sec277-313 grounds-sec 218(1) Voluntary sec 254-276 sec 277-313 members’ creditors’ sec 258-259 sec 260-263 grounds grounds sec254(1))(a) sec 254(1)(b) sec 254(1)(b) sec 255 .