winding up and dissolution of companies.

Winding up is the signing of the death warrant of the company or a pronouncement of the death of the company. Tate Industries Plc. v. Devcom M.B. Ltd. (2004) 17 NWLR (Pt. 901)182. Winding up involves the process where a company is liquidated and dissolved and its assets are distributed in accordance with rules of priority for the benefit of its creditors, members and employees.

The various modes by which a company may be wound up are the following:

• a. Compulsory winding up by the court.
• b. Voluntary winding up
• c. Winding up subject to the supervision of the court.

The effect of the commencement of a winding up proceeding is that any disposition of the property of the company including choses in action and any transfer of shares or alteration in the status of members of the company shall be void unless the court orders otherwise after commencement of winding up. Also, any attachment, sequestration, distress or execution put in force against the estate or effects of the company after commencement shall be void. Section 576 CAMA, 2020.

By Section 571 of the Companies and Allied Matters Act, the compulsory winding up of the court is activated when the following happen:

• a. The company has by special resolution agreed that the company be wound up by the court.
• b. Default is made in delivering the statutory report to the Corporate Affairs Commission or holding of the statutory meeting.
• c. The number of members is reduced below two.
• d. The company is unable to pay its debts.
• e. The condition precedent to the operation of the company has ceased to exist .
• f. The court is of the opinion that it is just and equitable that the company should be wound up.

The mode of application for compulsory winding up is by petition to the Federal High Court. By Section 573 of the Companies and Allied Matters Act, persons that can make the application are:

• a. The company.
• b. A creditor including a contingent or prospective creditor of the company.
• c. A contributory. Dematic (Nig.) Ltd. v. Utuk (2022) 8 NWLR (Pt. 1831) 71.
• d. The Corporate Affairs Commission.
• e. The official receiver.
• f. A trustee in bankruptcy to, or a personal representative of a creditor or contributory.
• g. A receiver if authorized under the instrument by which he was appointed.
• h. All the persons aforementioned, together or separately.

By Rules 16 to 30 of the Company Winding up Rules, the procedure for compulsory winding up is as follows:

• a. Filing of the Petition for winding-up along with a verifying affidavit.
• b. Service of the Petition and Affidavit on the respondent with proof of service.
• c. Obtain leave of court to advertise petition.
• d. Advertise the petition.
• e. File Memorandum of Compliance by the petitioner.
• f. File a Notice of intention to appear, Memorandum of Appearance and an affidavit in opposition to the petition by the respondent.
• g. The petitioner files a Reply to the Respondent’s processes.
• h. Appointment of Provisional Liquidator.
• i. Filing and hearing of Summons for Security for Costs.
• j. Filing of List of Persons Appearing (creditors)
• k. Hearing of Petition
• l. Making of winding-up order.
• m. Service of winding-up order.
• n. Application for dissolution and the order of dissolution made.
• o. Appeals from the order of dissolution and enforcement.
• p. Appointment of a liquidator.
• q. Advertisement of winding up order.
• r. Delivery of statement of affairs.

Under voluntary winding up, there is member’s voluntary winding up and creditor’s voluntary winding up. This mode of winding up is originally the member’s voluntary winding up, the later comes into play as a result of failure of the directors to statutorily declare solvency and deliver such declaration to the Corporate Affairs Commission. Section 625(4) CAMA, 2020.

A company in this regard may be wound up voluntarily in two respects, namely:

• a. By an ordinary resolution when the period fixed for duration of the company by its articles expires or the duration was contingent upon the happening of an event and such event happens.
• b. If the company resolves by special resolution that the company be wound up voluntarily. Section 620 CAMA, 2020.

The procedure for members’ voluntary winding up is as follows:

• a. Directors in board of directors’ meeting make statutory declaration of solvency within 5 weeks and delivered with the resolution to the Corporate Affairs Commission within 15 days after the passing of the resolution.
• b. Notice of general meeting of the company is issued.
• c. A special resolution for voluntary winding up within 5 weeks of making statutory declaration is passed at the general meeting.
• d. The Company at the general meeting appoints one or more liquidators for the purpose of winding up the affairs and distributing the assets of the company and may fix the remuneration to be paid to him or them.
• e. Upon appointing liquidator or liquidators, the powers of the directors cease except the company in general meeting or liquidator sanctions the continuance.
• f. Notices of special resolution and appointment of a liquidator or liquidators are given to the Corporate Affairs Commission within 14 days of it being passed or appointment. Also, advertisement is made in the gazette or two daily newspapers.
• g. The liquidator or liquidators may call or summon a meeting of creditors of the company if in its opinion the company would not be able to pay its debts within 12 months.
• h. Where winding up will be more than one year, the liquidator summons a general meeting of the company at the end of the first year and lay before the meeting an account of his acts and dealings and of the conduct of winding up during the preceding year. A copy of the accounts is to be delivered to the Corporation Affairs Commission within 28 days for registration
• i. Where the affairs of the company is fully wound up, the liquidator shall prepare and send to every member of the company, final accounts and convene a final meeting of the company for the purpose of laying before it such accounts.
• j. The account shall be audited by the auditor of the company unless the liquidator is qualified for appointment as auditor of a public company or the company has resolved on or after appointment of the liquidator that the account should not be audited.
• k. If quorum was present at the meeting, a copy of the account and a return of the holding of the meeting shall be sent to the Corporate Affairs Commission within 7 days of the meeting. If no quorum, a return to the effect that the meeting was duly summoned but no quorum would be delivered to the Corporate Affairs Commission within 7 days.
• l. The Corporate Affairs Commission, on receiving the account and appropriate return, shall register them and on the expiration of 3 months from the registration of the return, the company shall be deemed to be dissolved.

Creditor’s voluntary winding up is occasioned by the failure of the directors of a company to make any statutory declaration of solvency of the company’s ability to pay its debt fully within a period of 12 months.

By Section 635 to 641 of Companies and Allied Matters Act, the following are the procedures taken in a members’ voluntary winding up:

a. Both the company and its creditors hold separate meetings to propose for a winding up of the company. The meeting of creditors is to be published in the Gazette and two newspapers. b. The meeting of the creditors is to be presided over by one of the directors who shall be appointed from the directors c. The directors lay the full statement of the company’s affairs with a list of the creditors of the company at the meeting. d. The liquidator and a committee of inspection with the maximum of 5 persons is to be appointed by the creditors and the company, but if the creditors reject the persons appointed by the company they stand disqualified unless the court otherwise directs. e. Upon appointment of the liquidator, all powers of the directors cease except as sanctioned by the Committee of Inspection or in its absence the creditors. f. The liquidator, within 14 days of his appointment publishes it in the gazette and 2 daily Newspapers and delivers to the Corporate Affairs Commission his notice of appointment for registration. g. A general meeting of the company and creditors is to be summoned if the winding up continues for more than 1 year within 3 months of the end of the first year and every succeeding year. h. The final meeting and dissolution of the company is held to enable the liquidator lay the account and give explanation. i. After the meeting, the liquidator within 7 days sends a copy of the account and return of the holding of the meeting to the Corporate Affairs Commission for registration. j. The company is deemed dissolved after 3 months of the registration of the accounts and return to the Corporate Affairs Commission. However, the court upon an application by the liquidator or a creditor can defer the date which the dissolution can take effect.

This is the winding up by company that started by company passing resolution to voluntarily wind up and subsequently a petition is brought to the court that the winding up should be subject to the supervision of the court. The application for winding subject to the supervision of the court can be made by creditors, contributories or any other person entitled under compulsory winding up. Section 649 CAMA, 2020.

The various officers in a winding up proceeding are the following:

• a. Liquidator
• b. Provisional liquidator.
• c. Official receiver.
• d. Receiver.
• e. Receiver manager.
• f. Special manager.

A Liquidator is a person who is appointed by the company or the court to wind up the affairs of a company and to distribute assets, if any, among creditors and contributories in accordance with the articles. He represents the interests of all creditors, especially unsecured creditors while a provisional liquidator is someone who plays the role of a liquidator until the main liquidator is appointed. His role ceases when a liquidator is appointed.

The liquidator in a winding up by the court has a power with the sanction of the court to:

• a. Bring or defend any action or other legal proceeding in the name and on behalf of the company.
• b. Carry on the business of the company so far as may be necessary for its beneficial winding up.
• c. Appoint a legal practitioner or any other relevant professional to assist him in the performance of his duties.
• d. Pay any classes of creditors in full.
• e. Make any compromise or arrangement with creditors or persons claiming to be creditors.
• f. Sell the property of the company by public auction or private contract and transfer the whole property.
• g. Do all acts and to execute in the name and on behalf of the company all deeds, receipt and other documents and for that purpose to use, when necessary, the company’s seal.
• h. Raise on the security of the assets of the company any money requisite
• i. Appoint an agent to do any business which the liquidator is unable to do himself.
• j. Do all such other things as may be necessary for winding up the affairs of the company and distributing its assets.