Hi I want to know, Have there been any changes to the procedure for a Compulsory Winding-Up?
A company can be wound up by the Court at the instigation principally of any member or creditor of the company or the Minister in appropriate circumstances. The Court appoints the liquidator who becomes an officer of the Court and works under its supervision.
**Compulsory Winding-up Under Companies Act 2013** The winding up process is the last stage in the life of a company, wherein its existence is dissolved and all its assets are used to satisfy the creditors and shareholders. Jyoti Srivastava gives a brief overview of the process of winding up under the provisions of the Companies Act, 2013 A company is a juristic person that comes into existence by way of incorporation and can be dissolved by undertaking a winding-up process as per the provisions of the Companies Act, 2013 (“New Act”). The winding up process is the last stage in the life of a company, wherein its existence is dissolved and all its assets are used to satisfy the creditors and shareholders. Reasons for Winding Up The reasons for compulsory winding up under the Companies Act, 1956 (Old Act) and the New Act remain same, except that the following grounds stand deleted as reasons for compulsory winding up under the New Act: a. Suspension of the business for one year from the date of incorporation or suspension of business for a whole year; or b. Reduction in number of members of a company below two (in case of a private company) and seven (in case of a public company). However, a new ground has been added for compulsory winding up under the New Act. On the application by the Registrar or any other person authorised by the Central Government by way of notification under the New Act, if the Tribunal is of the opinion that the affairs of the company have been carried out in a fraudulent manner or unlawful purpose or any person concerned or involved in the management or affairs of the company has acted in a fraudulent manner or misfeasance or misconduct, that it is better to wind up the company. Winding Up Process Chapter XX, Part-I of the New Act deals with the compulsory winding up process. The petition for compulsory winding up can be presented to the appropriate authority by: a. The company; or b. The creditors (contingent/ prospective creditors1/creditors); or c. Any contributory or contributories; or d. All or any person specified in (a) (b) (c) together; or e. By the Central or the State government2; or f. By the Registrar or any person authorised by the Central government for that purpose. Filing of Winding up Petition The draft rules provide that a winding up petition (‘Petition’) is to be filed under section 272 of the New Act in the prescribed form no 1, 2 or 3, whichever is applicable and is to be submitted in three sets. Statement of Affairs of the Company If the company files the Petition, it shall be accompanied with the statement of affairs (‘Statement’) in Form No. 4 read with section 272(5) of the New Act. The Petition shall state the facts up to a specific date, which shall not be the date more than fifteen days prior to the date of making of the Statement. A Chartered Accountant in practice shall duly certify this Statement. The fee for filing the Petition shall be submitted as prescribed in Annexure-B of the draft rules. Advertisement of the Petition Subject to the directions of the Tribunal, the petition shall be advertised in not less than fourteen days before the date fixed for hearing in one daily newspaper in English language and one daily newspaper in the principal regional language circulating in the State or union territory where the registered office of company is situated. The advertisement needs to be carried out in Form No 6. The previous requirement of publication in the official gazette of the State or union territory mentioned in Company Court Rules (1959), has been done away with under the New Act. Final Order and its Content The Tribunal after hearing the Petition has the power to dismiss it, with or without cost, or to make an interim order, as it thinks fit, or can appoint the provisional liquidator of the company till the passing of the winding up order. An order for winding up of a company will be in Form 11 and contains the footnote prescribing the following duties: a. To submit the complete and audited book of accounts up to the date of order; b. To attend the company liquidator at the required time and place with all information; c. To surrender the assets3 of the company and documents related to it, including those documents from which the benefit from the assets accrues. Winding up or liquidation is not a legal exercise only to satisfy the debts of creditors, but also signifies loss of brand value that the company enjoyed in its entire history. There is not much of a difference in the manner in which the two legislations deal with the process of liquidation, except that the New Act has somewhat simplified the process. The draft rules pertaining to the winding up of a company are yet to be released by the Ministry of Corporate Affairs. Winding-up of every company is food for thought to others in the field to understand what went wrong in governing a company.
Introduction 1.1 The principal legislation for companies winding-up is contained in the Companies (Winding Up and Miscellaneous Provisions) Ordinance and Companies (Winding-up) Rules (Chapter 32). 1.2 The main objectives of the companies winding-up are: (a) to ensure that all the company's affairs have been dealt with properly; (b) to have the company dissolved. 1.3 Modes of winding-up include : (a) voluntary winding-up which consists of : (i) members' (shareholders') voluntary winding-up; and (ii) creditors' voluntary winding-up; (b) compulsory winding-up by the High Court of the Hong Kong Special Administrative Region (“the court”). 1.4 The Official Receiver's Office mainly administers compulsory winding-up cases. For voluntary winding-up cases, the Official Receiver's Office is only responsible for keeping the unclaimed and undistributed money pursuant to section 285 of the Companies (Winding Up and Miscellaneous Provisions) Ordinance and rule 183 of the Companies (Winding-up) Rules. Winding-up Petition 2.1 A limited company may be wound up by the court in the circumstances set out in the Companies (Winding Up and Miscellaneous Provisions) Ordinance. The more common ones are : (a) the company is unable to pay a debt of $10,000 or above; (b) the court is of the opinion that it is just and equitable that the company should be wound up; or (c) the company has by special resolution resolved that the company be wound up by the court. 2.2 A creditor, a shareholder or the company itself can file a winding-up petition against the company. 2.3 A solicitor is normally instructed by the petitioner to prepare and file the winding-up petition. 2.4 Any person (e.g. employee) who is qualified for receiving legal aid under the Legal Aid Ordinance and Rules may apply to the Legal Aid Department for assistance in filing a winding-up petition. [For details, please contact the Legal Aid Department direct.] Procedures for Filing Petition 3.1 The procedures for filing a winding-up petition are : (a) prepare a petition according to Form 2 or 3 in the Appendix of the Companies (Winding-up) Rules with such variations as circumstances may require; (b) deposit with the Official Receiver's Office a sum of $11,250 for the purpose of covering the fees and expenses to be incurred by the Official Receiver; (c) go to the Registry of the High Court to: (i) pay a court fee of $1,045, (ii) obtain a date for the hearing of the petition, and (iii) file the petition. (d) submit a copy of all documents filed in the High Court in connection with the petition to the Official Receiver within 24 hours after such documents are filed with the court; (e) advertise the petition seven clear days before the hearing date of the petition once in the Gazette and once at least in two Hong Kong daily newspapers (one Chinese and one English); (f) deliver a sealed copy of the petition to the registered office of the company or, in case there is no registered office of the company, the principal or last known principal place of business of the company; and (g) file an affidavit verifying the petition within four days after the petition is filed with the court using Forms 7 and 8 in the Appendix of the Companies (Winding-up) Rules. Note If a petitioner wishes to withdraw a petition already filed in the court, he has to apply to the court for approval. He is also required to pay the costs of the Official Receiver's Office. Effects of Compulsory Winding-Up 4.1 Once a winding-up petition is filed in the court, the winding-up of the company shall be deemed to commence at the time of the filing of the petition for winding-up. 4.2 After the commencement of winding-up : (a) any disposition of the property of the company, including any transfer of shares or alteration in the status of the shareholders of the company, unless the court orders otherwise, is void; and (b) the company or any creditor or shareholder may apply to the court to stay or restrain any pending action or proceeding against the company. Note If the petitioner believes that the assets of the company are in jeopardy, he may apply to the court, after the filing of the winding-up petition, for the appointment of a provisional liquidator to safeguard the assets of the company prior to the hearing of the petition. This will require a further sum of $3,500 to be deposited with the Official Receiver's Office by the petitioner. Additional sums may be required to be deposited when necessary. If a provisional liquidator is appointed prior to the hearing of the winding-up petition, the court will appoint him to be the provisional liquidator when making the winding-up order. 4.3 After the provisional liquidator is appointed or the winding-up order is made against the company : (a) no action or proceeding shall be continued or commenced against the company except with the approval of the court; (b) the Official Receiver will become the provisional liquidator of the company unless a provisional liquidator has already been appointed prior to the making of the winding-up order (see Note in 4.2 above); (c) if the property of the company is not likely to exceed in value $200,000, the Official Receiver, when acting as provisional liquidator, may appoint another person as provisional liquidator in his place; and (d) the provisional liquidator will take over control of the company including its assets and accounting records and investigate the company's affairs. First Meetings of Creditors and Contributories 5.1 If the property of the company is likely to exceed in value $200,000, the provisional liquidator appointed after the making of the winding-up order will convene and chair the first meetings of creditors and contributories within three months from the date of the winding-up order for the purpose of appointing a liquidator and a committee of inspection. 5.2 For the first meeting of creditors, only creditors whose Proof of Debt Forms have been admitted for voting purpose by the chairman of the meeting have the right to vote. 5.3 For the first meeting of contributories, only contributories whose names appear in the latest Annual Returns of the company filed with the Companies Registry have the right to vote. Note Creditors and contributories may decide, in suitable cases, whether an application should be made to the court, under section 209A of the Companies (Winding Up and Miscellaneous Provisions) Ordinance, for an order for the winding-up of the company to be conducted as if it were a creditors' voluntary winding-up. 5.4 The chairman of the meetings will report the results of the meetings to the court and apply for an order of appointment of liquidator and members of the committee of inspection, if any. 5.5 Where the provisional liquidator is of the opinion that the property of the company is not likely to exceed in value $200,000, he may apply to the court for an order that the company be wound up in a summary manner, i.e. there will be no first meetings of creditors and contributories and the provisional liquidator shall be the liquidator without a committee of inspection. 5.6 If any creditor or contributory requests for the summoning of the first meetings of creditors and contributories, the provisional liquidator should give due consideration to such request even though he is of the opinion that the property of the company is unlikely to exceed in value $200,000. Duties of Directors of a Wound-up Company 6.1 On the appointment of a provisional liquidator or the making of the winding-up order, the powers of the directors of the company will cease. The directors must then : (a) deliver to the provisional liquidator or liquidator the company's assets, books and records and seal; (b) attend the office of the provisional liquidator or liquidator for interview to provide information of the company's assets and dealings; (c) submit a sworn statement of affairs of the company (similar to a balance sheet) within 28 days after the appointment of a provisional liquidator or the making of the winding-up order; (d) attend meetings of creditors and contributories when notified by the provisional liquidators or liquidators; (e) continue to co-operate with the provisional liquidator or liquidator until the liquidation is concluded; and (f) notify the provisional liquidator or liquidator of any change in address. 6.2 Directors who fail to perform their duties such as failure to keep and preserve books and records of the company, failure to prepare and submit the statement of affairs, etc. may be prosecuted (see 10.1 below) and disqualified from acting as directors for a certain period of time (see 11.1 and 11.2 below).
Dear, your query is that Have there been any changes to the procedure for a Compulsory Winding-Up? answer of your query is that A company can be wound up by the Court at the instigation principally of any member or creditor of the company or the Minister in appropriate circumstances. The Court appoints the liquidator who becomes an officer of the Court and works under its supervision. Alternatively, the court may direct that the liquidation continue using the rules relating to a Creditors Voluntary Winding Up. Thanks & Regards,