Winding up is a process in which the existence of a company is brought to an end, where assets of a company are collected and realised. The proceeds collected are used to discharge the company’s debts and liabilities and the remaining balance (if any) will be is distributed amongst the contributories according to their entitlement.
There are 2 modes of winding up:
- Voluntary winding up (VWU); and
- Compulsory i.e. Winding up by Court
The process flow for winding-up (both VWU and Compulsory) in the Companies Act 1965 (CA 1965) is retained in the Companies Act 2016 (CA 2016.)
Section 619 (6) of the CA 2016 states that a company which is in the course of winding-up immediately before the commencement of the Act shall continue to be wound up under the relevant provisions in the Companies Act 1965.
*CA 2016 commenced on 31.1.2017.
Voluntary winding up
Voluntary winding is divided into 2 categories, namely members’ voluntary winding (MVWU) and Creditors’ voluntary winding up (CVWU):
- Section 257 of the CA 1965 define members’ voluntary winding (MVWU) up as the liquidation of a solvent company where the directors have formed an opinion that the company will be able to pay its debts in full within the period of 12 months after the commencement of winding up.
- Section 433 of the CA 2016 further defines (MVWU) as A winding up in the case of which a directors’ declaration under section 443 has been made ; and a winding up in the case of which such a declaration has not been made is a “creditors voluntary winding up”.
Company winding up by Court
Winding up by Court is also known as a compulsory winding up. It begins with the presentation of a petition in Court. The petitioners include creditors, liquidator, the Registrar of companies or the Official Receiver under section 217(1) of the CA 1965 or section 464 of the CA 2016.