Define winding up of companies
procedure by which a company’s assets are sold, debts are paid and the remaining amount is paid to the shareholders of their rights
Modes and alternatives for winding up
1) compulsory winding up
2) voluntary winding up
- on application voluntary may be converted to compulsory
- alternative = business rescue
Discuss business resuce
- reasonable prospect of being rescued
- court van make order for winding up of company or for the enforcement of security
- application suspends liquidation
What happens when a court dismisses business rescue
winding up of company
Discuss winding up by court (compulsory)
1) jurisdiction of court
2) when companies can be wound up
3) parties to apply for insolvent companies
4) parties to apply for solvent companies
5) steps prior to application
6) powers of court
When can a company be wound up?
1) special resolution
2) failure to commence/continue with business
3) loss of capital
4) inability to pay debt
5) dissolution of external company
6) just and equitable
7) conversion of voluntary to compulsory
8) no reasonable prospect of business rescue succeeding
9) termination of business rescue
10) dead-lock in management/voting
11) fraud/illegality/misapplication of company assets
12) failure to comply with compliance notice
Who may apply for insolvent companies?
- the company
- one/more creditors
- one/more members
- any/all of the above parties
- the master
- a provisional/ final judicial manager
Parties to apply for solvent companies?
1) special resolution - the company itself
2) just and equitable - the company, one/more creditors
3) conversion of voluntary to compulsory - the company
4)no reasonable prospect of business rescue succeeding - appointed practitioner
5)termination of business rescue - one or more creditors
6) deadlock in voting - the company, one or more creditors
7) fraud, illegality or misplacement of assets - any shareholder with leave of the court
8) failure to comply with compliance notice - the CIPC or Take over regulation panel
Steps prior to application
1) security for costs
2) master’s report
3) notification of interested parties
Discuss Voluntary winding up
- special resolution that exists out of winding up by members and winding up by creditors
Members and company voluntary winding up
- before process can proceed: security must be furnished to satisfaction of Master and the Master must dispose such security
- reasons to be resorted to : purpose of company is fulfilled and the members are no longer on amical terms
Creditors voluntary winding up
- may be resorted to when company is unable to pay debts
- solvent OR insolvent companies
Consequences of winding up
- commencement of winding up
- directors divested of power and control
- unauthorised dispositions void
- stay of proceedings
- notice of winding up
- lodging of statement of affairs with Master
Meetings and proof of claims in winding up
- creditor’s meetings
- member’s meetings
- proof of claims
