Winding Up Companies
The first two methods of ending corporate existence are by means of a member's voluntary winding up and a creditors' voluntary winding up. Court involvement is limited. The difference between these two forms of voluntary winding up is that in a members' voluntary winding up the company must be solvent, while this will not be the case in a creditors' voluntary winding up. The third method of winding up is that of a compulsory court ending up. This method would be used where a creditor of the company is owed money.

The company must be solvent, and, for whatever reason, the members of that company have decided to end its existence.

Declaration of solvency

Feature of members' voluntary winding up is the declaration of solvency which must be sworn by the directors of a company, or majority of them, at a meeting of the directors.

It should be noted that where, contrary to the statutory declaration sworn by the directors, a company is in fact insolvent, the Companies Act 1963 provides for the imposition of personal liability for the debts of the company, on the directors.

The resolution to wind up

After the directors of a company have made their declaration of solvency, and the independent person has given his report, the directors should then call an extraordinary general meeting ('EGM') of the company. This should be held within 28 days of the date of the declaration of solvency.

A creditors voluntary winding up will usually arise where the members in general meeting resolve that the company cannot by reason of its liabilities continue its business, and that it be wound up voluntarily. The essential features of a creditors' voluntary winding up are the absence of a declaration of solvency and also the fact that the winding up is precipitated by the members themselves, usually on the advice of the directors. In this section the following issues in creditors' voluntary winding up are considered:

Set out below is an outline of the procedures and further detail can be provided if the directors wish:
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The primary duties of a liquidator are normally the realisations of assets, agreement of creditors' claims and the distribution of available assets to the creditors in accordance with their statutory priorities. The liquidator also has a general duty to investigate the conduct of the directors during the period to liquidation. This general duty, which would have been carried out by most insolvency practitioners, has been given extra weight as a result of the commencement of the Company Law Enforcement Act 2001.

A compulsory liquidation, will arise where the High Court is petitioned to have a company compulsorily wound up. This procedure is often used by creditor owed money by the company.

The first stage in the process is service of a document known as a Statutory Demand which gives the company 21 days to make payment. If payment is not received or the demand challenged the next stage is to issue a Winding Up Petition seeking the Winding Up the company. The Petition is given a date by the Court and it is advertised in national newspapers and at the hearing date if payment is not made a Liquidator will be appointed and the company will be put into Liquidation.

Thereafter Liquidator will deal with the realisation of assets of the company and deal with the general affairs of the company.