ACCA LW清盘：Compulsory winding up

Introduction

There are two ways in which a company may be wound up:by the company voluntarily(voluntary winding up),or by the court(compulsory winding up).Conceptually there is no relationship at all between how a winding up commences and whether the company is solvent or insolvent.A solvent company may be wound up compulsorily,and an insolvent company may go into voluntary winding up.Most people equate winding up with insolvent winding up,but it is important to realise that a perfectly solvent company may nevertheless be wound up.It may happen because the shareholders can no longer get along,the company is in a declining business with no future prospects,the company has achieved the purpose for which it was set up,or for any other reason.

Compulsory winding up

(1)Outline of the procedure

A compulsory winding up is initiated by an application to court by a person who is entitled to do so(ie they have locus standi or standing to do so).The application must be based upon one of the grounds set out in the Insolvency,Restructuring and Dissolution Act(IRDA)2018.

The court will decide,at the hearing of the application,whether to grant or dismiss it.If the application is granted,an order to wind up the company will be made.The winding up is deemed to have commenced at the time of the application for winding-up.

(2)Persons who may petition

Under s.124(1)IRDA,the creditor,amongst others,are entitled to present a winding-up petition.

By far the vast majority of winding up applications are made by creditors seeking to enforce the payment of undisputed debts.However a creditor whose debt is disputed by the company bona fide on substantial grounds should not apply to wind up the company as it would be dismissed.The‘creditor’in this case should establish the existence of the debt first.

(3)Grounds for winding up by the court

(a)General

Section 125 IRDA sets out a number of grounds on which the court may make a winding up order.The ground commonly relied on by the creditor is that‘the company is unable to pay its debts.’

(b)Winding up on the ground of insolvency

There are different ways by which this ground may be established.It is useful to view them as falling broadly into two groups.

(i)The first group,contained in s.125(1)(e)and s.125(2)(c),consists of general criteria of inability to pay debts,which may be proven by reference to the cash flow(or commercial)insolvency test or the balance sheet test.In seeking to establish that either one of the two tests is satisfied,creditors may face difficulties due to lack of evidence or other problems.The legislature has thus provided for alternatives in the second group of tests of insolvency.

(ii)The second group,embodied in s.125(2)(a)and(b),consists of two very specific and readily ascertainable facts deemed to establish inability to pay debts–ie when a statutory demand for debts is not met or when an execution is returned unsatisfied.

Under the cash flow test,a company is insolvent when it is unable to pay its debts as they fall due.For this purpose,the fact that its assets exceed its liabilities is irrelevant;if it cannot pay its debts in the conduct of its business it is insolvent,for there is no reason why creditors should be expected to wait while the company realises assets,some of which may not be held in readily liquidated form.As for the balance sheet test,the underlying idea is that it is not sufficient for the company to be able to meet its current obligations if its total liabilities cannot ultimately be met by the realisation of its assets.Hence for this test contingent and prospective liabilities of the company will be taken into account in determining whether the company is balance sheet solvent.

A creditor who is owed more than$15,000 may serve a demand(known as a statutory demand)on the company at its registered office requiring payment of the sum due.If the company has not paid the claim within three weeks,it is deemed to be unable to pay its debts,and the creditor is entitled to apply to wind up the company based on that.

A creditor who has obtained judgment against another party is known as a judgment creditor.A judgment creditor who is not paid is entitled to levy execution against the assets of the company,for example,by seizing and selling its assets or obtaining a charging order against the company’s property,in order to be paid.If the execution is returned unsatisfied,the company will be deemed to be unable to pay its debts.【点击免费下载>>>更多ACCA学习相关资料】

Voluntary winding up

A compulsory winding up is a winding up ordered by the court.A voluntary winding up,on the other hand,is a winding up initiated by the company;hence the word‘voluntary’is used to describe this kind of winding up.

A voluntary winding up may be either a members’voluntary winding up or a creditors’voluntary winding up.Regardless of whether it is one or the other,a voluntary winding up is initiated by the company taking steps to pass a special resolution to that effect,and the winding up commences on the passing of the resolution.

The criterion that determines whether a winding up is a members’or creditors’voluntary winding up is whether the company is solvent or insolvent.If the directors make a declaration of solvency in accordance with s.163 IRDA,the winding up will be a members’voluntary winding up.The declaration is a written statement,made not more than 5 weeks before the passing of the winding-up resolution,that the directors have inquired into the affairs of the company,and have formed the opinion,at a directors’meeting,that the company will be able to pay its debts in full within 12 months after the commencement of the winding up.If the directors do not make such a declaration,the winding up will be a creditors’voluntary winding up.

If the declaration of solvency turns out to be false,several consequences follow.The liquidator,once they form the opinion that the declaration is false,is under a duty to summon a meeting of creditors.At the meeting,the creditors are entitled to appoint another person to be the liquidator;and regardless of whether they do so,the winding up will thereafter proceed as a creditors’voluntary winding up.Second,the directors who make the declaration will be guilty of an offence unless they can show that they had reasonable grounds for making it.

There are a few important procedural and substantive differences between the two forms of winding up.First,in the case of a creditors’voluntary winding up,a creditors’meeting must be summoned,to be held on the same day as the company’s meeting,or on the next day.This meeting is not necessary in a members’voluntary winding up.Second,the members are in the driving seat in a member’s voluntary winding up,for example,they get to appoint the liquidator.The creditors,on the other hand,are in control in a creditors’voluntary winding up.They appoint the liquidator and the members of the committee of inspection.

【ACCA LW公司法：Common Law】