WINDING-UP OF BUSINESS ORGANISATIONS II (COMPANIES)

SIGNIFICANCE AND LEGAL EFFECT OF WINDING-UP

Winding-up is the most common process of bringing a registered company to an end and distribution of its assets for the benefit of members and creditors.

Companies are creatures of the law, and therefore, their dissolution is governed by statutory provisions. The winding-up process terminates the company’s attribute of perpetual succession which is one of the ways to dissolve a registered company under the Act. Also, the fact of winding-up of a company or the appointment of liquidator does not by itself result in the death of the corporate body thereby removing its legal personality.

It should be noted that a company winding has not died for it is still alive; it only dies on dissolution – C. S. (Nig.) Plc v. Mbakwe (2002) 3 NWLR (Pt. 755) 523 at 527 – 528.

During the winding-up process, the assets of the company are realised, sold and applied to pay off its debts and whatever is left as the surplus is distributed to the shareholders in accordance with the provisions of the memorandum and articles of association.

The terms “winding-up” and “liquidation” are usually regarded as being synonymous and are consequently used interchangeably. In Musa v. Ehidiamhen (1994) 3 NWLR (Pt. 334) 544, it was stated that both refer to the process whereby an end is put to the “life” of a company and its property administered for the benefit of its creditors and members.

TYPES OF WINDING-UP OF COMPANIES

There are three types of winding-up of companies viz –

1.      By the Court (Federal High Court);

2.      Voluntarily; or

3.      Subject to the supervision of the court – section 401 of Companies and Allied Matters Act (CAMA), Cap. C20, LFN 2004.

WINDING-UP BY THE COURT

A company may be wound-up by an order of the court. The court that has jurisdiction is the Federal High Court whose jurisdiction covers the area where the registered office or head office of the company is located – section 407(1) of CAMA.

Section 407(2) of CAMA defines “registered office or head office” as the place with the longest time of registration of the office or head office of the company during the six (6) months immediately preceding the presentation of the petition for winding-up. In Medicore (Nigeria) Ltd. v. Labwares (Nigeria) Ltd. (1985) FHCR 240, a company’s registered office is in Illorin, Kwara State. A petition was brought in a Lagos court to wind-up the company. It was held that the court that had jurisdiction to wind-up the company is the court within whose area of jurisdiction the registered office of the company is situated, which is the court in Illorin. Therefore, the Lagos court was incompetent to hear the petition. Also, in IMB Nigeria Ltd. v. Lomay Nigeria Ltd. (1986) FHCR 28, where a petition was brought for convenience in Lagos against a company whose registered office is in Jos, the petition was struck out.

Where a company is being wound-up by the court, any attachment, sequestration, distress or execution put in force against the company after the commencement of the winding-up shall be void by virtue of section 414 – N.D.I.C v. Ifediegwu (2003) NWLR (Pt. 800) 56.

GROUNDS FOR WINDING-UP BY THE COURT

The grounds or circumstances in which a registered company may be wound-up by the court are –

1.      Where the company has by a special resolution resolved that the company be wound-up;

2.      Where default is made in delivering statutory report to the commission or in holding the statutory meeting;

3.      Where the number of members is reduced below two;

4.      Where the number of members is unable to pay its debts; and

5.      Where the court is, of the opinion that it is just and equitable that the company be wound-up – section 408(a) – (e) of CAMA.

BY SPECIAL RESOLUTION

All that is required for a company to be wound-up under this ground is that the resolution must be duly passed at a meeting duly and properly convened and it should require that the company be wound-up by the court. Such instances are rare because a company would rather pass a special resolution to wind-up the company voluntarily under section 457(b) of CAMA.

DEFAULT MADE IN DELIVERING STATUTORY REPORT

This can only be brought by a shareholder and it must be before the expiration of fourteen (14) days after the last day on which the meeting should have been held under section 410(2)(b) of CAMA.  The court may, instead of making a winding-up order, direct that a meeting be held or the report be delivered, and make orders as to costs as it thinks fit – section 411(3) of CAMA. This ground is only applicable to public companies – section 211(1) of CAMA.

REDUCTION OF MEMBERS BELOW TWO

A company cannot be incorporated with less than two persons which is the legal requirement – section 18 of CAMA. A company which is in default of this would be wound-up by the court in addition to other sanctions as to liability – section 93 of CAMA. This is one of the cases where a contributory is expressly authorised to bring a petition for winding-up – section 410(2) of CAMA.

INABILITY TO PAY DEBT

Section 409 of CAMA makes provision in relation to when a company is deemed to be unable to pay debts. These are –

1.      If the company owes a creditor a sum exceeding N2,000 (Two thousand naira) which is due for payment and a demand has been made on the company for payment with the company not being able to pay, secure or compound the debt to the satisfaction of the creditor for three (3) weeks after the demand has been made.

2.      Where execution has been levied or other process issued against the company in respect of a judgment debt and it is returned unsatisfied in whole or in part.

3.      If the court is satisfied that the company is unable to pay its debts after taking into account any contingent or prospective liability of the company.

The courts often apply strict rules in granting an application for winding-up based on the ground since it is often abused. Thus, the debt must be disputed. In Re London & Paris Banking Corporation (1874) LR 19 Eq 444 at 644, per Jessel M. R stated thus –

“... I should be bound to hold that if the debt is bona fide contested and there is no evidence other than non-compliance with the statutory notice to show that the company is insolvent, and the company denies this insolvency, I ought to dismiss the petition”.

In such a case, a petition based on inability to pay debt was dismissed because the debt was disputed. Also, in Re Brighton Club & Norfolk Hotel Co. Limited (1865) 35 Beav. 205, a petition for winding-up was based on failure to pay debt after a demand has been made for same. The petition was not granted because there was no bona fide dispute as to the exact amount that was due. In Tandy and Freeman v. Harmony House Furniture Co. Ltd. (1972) NCLR 163, the Supreme Court granted a petition for the winding-up of a company on the basis of her inability to pay her debt.

For a petition for winding-up to be successful on the ground of inability to pay debt, a demand must have been made on the company after which the company defaults in settling same within three weeks after the demand. In Nigerian Commercial & Industrial Enterprises Ltd. v. Registrar of Companies (1973) 1 FRCR 249, it was held that a demand made by the solicitor to a company for payment of debt was not a demand by an officer of the company.

JUST AND EQUITABLE GROUND

This ground is based entirely on the discretion of the court and is also popular with applicants. However, the courts would consider a lot of factors before coming to the conclusion that a company should be wound-up on just and equitable ground. Whether it is just and equitable to wind-up a company depends on the facts which are available to the court at the time of hearing of the application as set out in the petition – Re Wondoflex Textiles Property Ltd. (1951) VLR 458.

Petitions have succeeded generally on the basis of this ground in cases of oppression of the minority by the majority – Ebrahimi v. Westbourne Galleries Ltd. (1972) 2 All ER 492, loss of substratum – Re Yenidije Tobacco Ltd. (1916) 2 Ch. 426, and deadlock amongst members.

In The Matter of the Stevedoring (Nig.) Co. Ltd. (1962) LLR 164, it was held that it was just and equitable to wind-up a small company where there was a disagreement between the members and directors and disagreement has adversely affected the business of the company. However, a petition on just and equitable ground should not be dismissed basically because the petitioner has some other remedies since the motive of the petitioner is irrelevant – Obasi v. Pureway Corporation (Nig.) Ltd. (1878) 4 FRCR 214. The petitioner is not entitled to a winding-up order on the just and equitable ground if his object is not a company purpose but the pursuit of a selfish advantage in a question between himself and other shareholders – Anglo American Brush Corporation Ltd. v. Scottish Brush Co. Ltd. (1882) 9 R. 972.

PETITION FOR WINDING UP

An application that the company be wound-up by the court shall be by petition and can be presented by –

1.      The company itself.

2.      A creditor, including a contingent or prospective creditor of the company.

3.      The official receiver.

4.      A contributory (which includes past and present members). See section 92 of CAMA.

5.      A trustee in bankruptcy to, or a personal representative of a creditor or contributory.

6.      The Corporate Affairs Commission.

7.      A receiver if authorised by the instrument under which he was appointed.

8.      All or any of those parties, together or separately – section 410(a) – (h) of CAMA.

PROCEDURE FOR WINDING-UP BY THE COURT

An application shall be made to the court for the winding up of a company which must be in the form of a petition. Every petition shall be in any of the Forms 2, 3, or 4 in the Appendix to the Rules with such variations as the circumstances may require – Rule 15 of the Winding-Up Rules, 1983. The following is necessary –

1.      Filing of the Petition for winding-up – Rule 16 of the Winding-Up Rules.

2.      Filing of the Affidavit verifying the Petition – Rule 18 of the Winding-Up Rules.

3.      Service of the Petition and Affidavit of Service – Rule 17 of the Winding-Up Rules.

4.      Advertisement of the Petition – Rule 19 of the Winding-Up Rules.

5.      Filing of Memorandum of Compliance.

6.      Filing of Notice of Intention to Appear – Rule 23 of the Winding-Up Rules.

7.      Appointment of Provisional Liquidator – Rule 21 of the Winding-Up Rules.

8.      Filing of Affidavit in Opposition and Affidavit in Reply – Rule 25 of the Winding-Up Rules.

9.      Summons for Security for Costs.

10.  Filing of List of Persons Appearing – Rule 24 of the Winding-Up Rules.

11.  Hearing of Petition – Rule 22 of the Winding-Up Rules.

12.  Making of winding-up order – section 415 of CAMA.

13.  Service of winding-up order – section 416 of CAMA.

14.  Delivery of Statement of affairs.

15.  Official Receiver's Preliminary Report – section 421 of CAMA.

16.  First Meeting of Creditors and Contributories – section 422(3)(c) of CAMA.

17.  Appointment of Liquidator – section 422 of CAMA.

APPOINTMENT OF LIQUIDATOR

The court may appoint a liquidator for the purpose of conducting the proceedings in winding-up a company – section 422(1) of CAMA. On the making up of a winding-up order, if no liquidator is appointed, the official receiver shall by virtue of his office become the liquidator – section 422(3)(b) of CAMA.

The liquidator must, within fourteen (14) days after his appointment publish in the Gazette and in two (2) daily newspapers and deliver to the commission for registration a notice of his appointment – section 491 of CAMA.

DISQUALIFICATION FOR APPOINTMENT AS LIQUIDATOR

The following are persons who are incompetent to be appointed or to act as liquidator in a winding-up by the court –

1.      An infant.

2.      An unsound mind.

3.      A body corporate.

4.      An undischarged bankrupt.

5.      Any director of the company under liquidation.

6.      Any person convicted of any offence involving fraud, dishonesty, official corruption or moral turpitude and in respect of whom there is a subsisting order to restraint fraudulent persons – section 509(1) of CAMA.

Any appointment made in contravention of the above shall be void – section 509(2) of CAMA.

POWERS OF A LIQUIDATOR

The liquidator, in a winding-up by court, exercises some powers, but the powers must be sanctioned by the court or the committee of inspection – section 425(1) of CAMA. These powers include –

1.      The power to bring or defend any action in the name and on behalf of the company;

2.      The power to carry on the business of the company as may be necessary for the purpose of the beneficial winding-up;

3.      The power to appoint relevant professionals or legal practitioner to assist him in the performance of his duties;

4.      The power to pay all classes of creditors in full;

5.      The power to make any compromise or arrangement with creditors or persons claiming to be creditors; and

6.      The power to compromise all calls, debts and liabilities capable of resulting in debts.

In Agbaoye v. Chief Federal Land Officer (1976) 2 FCRC 33, it was held that a liquidator must obtain a sanction (consent) from either the court or committee of inspection before instituting or defending an action in the name and on behalf of the company.

There are also further powers of a liquidator which are provided under section 425(2) of CAMA –

1.      The power to sell the property of the company by public auction or private arrangement.

2.      The power to do all acts and to execute in the name and on behalf of the company, all deeds, receipts and other documents.

3.      The power to prove, rank and claim in the bankruptcy, insolvency or sequestration of any contributory.

4.      The power to draw, accept, make and indorse any bill of exchange or promissory note in the name and on behalf of the company.

5.      The power to raise any money required on the security of the assets of the company.

6.      The power to appoint an agent to do any business which the liquidator is unable to do himself.

DISSOLUTION

When the winding-up is completed, the liquidator may apply to the court which then makes a dissolution order; the company shall be dissolved accordingly from the time of the order – section 454(1) of CAMA.

The liquidator is required to send a copy within fourteen (14) days (from the day the order was made) to the Commission who shall make in its books a minute of the dissolution of the company – section 454(2) of CAMA. Failure to comply with the provision by the liquidator will attract a fine of N25 (Twenty five naira) daily of the breach – section 454(3) of CAMA.

Once a company is fully wound-up and dissolved, it loses its legal entity and ceases to exist in law – CBCL (Nig.) Ltd. v. Okoli (2009) 5 NWLR (Pt. 1135) 446.

Under section 454(1) and (2), a company dies once the court orders the dissolution of the company. However, the revocation of the license of the company and order of court winding-up same does not indicate the death of a company. The appointment of a liquidator is for the purpose of ensuring the smooth burial of the company – Progress Bank (Nig.) Plc. v. O.K Contact Point Ltd. (2008) 1 NWLR (Pt. 1069) 514 at 531 – 532; Nzon v. Jinadu (1987) 1 NWLR (Pt. 51) 533; C.C.B (Nig.) Ltd. v. Onwuchekwa (2000) 3 NWLR (Pt. 647) 65.

VOLUNTARY WINDING-UP

A company may be voluntarily wound-up under two situations namely –

1.      When the period fixed for the duration of the company by the articles expires or an event provided for occurs, on occurrence of which the articles for the dissolution of the company occurs and the company has passed a resolution that the company be wound-up voluntarily; and

2.      Where the court has passed a special resolution that the company be wound-up voluntarily – section 457 of CAMA.

Where a resolution has been passed for voluntary winding-up, a notice of the resolution shall be given to the public and the Commission within fourteen (14) days of the passing of the resolution advertisement in the Gazette or two daily newspapers – section 458(1) of CAMA. Default in the publication of the notice as required attracts a penalty against the company and every officer of the company in default – section 458(2) of CAMA.

In a voluntary winding-up, the process is deemed to have commenced when the resolution for winding-up is passed – section 459 of CAMA. The effect is that the company shall immediately cease to do business except a business that facilitates a beneficial winding-up of the company – section 460 of CAMA.

TYPES OF VOLUNTARY WINDING-UP

Voluntary winding-up is of two types, namely –

1.      Members voluntary winding-up; and

2.      Creditors voluntary winding-up.

MEMBERS VOLUNTARY WINDING-UP

This is where a statutory declaration of solvency shall be made by the directors to the effect that they have made a full inquiry into the affairs of the company and have formed an opinion that the company is able to pay its debt in full within a period not exceeding twelve (12) months from the commencement of the winding-up process – section 462(1) of CAMA.

PROCEDURE FOR MEMBERS’ VOLUNTARY WINDING-UP

1.      Declaration of solvency – For the declaration of solvency to be effective under the Act, it must be made within five (5) weeks immediately preceding the date of the passing of the resolution for voluntary winding-up and must be delivered to the Corporate Affairs Commission for registration. It must also embody a statement of the company’s assets and liabilities as at the latest date before the making of the declaration – section 462(2) of CAMA.

2.      Special resolution – A general meeting of the members of the company shall be called to pass a special resolution that the company be wound up – section 457(b) of CAMA.

3.      Appointment of liquidator – At the general meeting, members shall also pass a special resolution appointing a liquidator. Once a liquidator is appointed, the directors will cease to act – section 464 of CAMA.

4.      Notice of special resolution to the Corporate Affairs Commission – A notice of special resolution shall be given to the public and the Commission within fourteen (14) days of the passing of the resolution advertisement in the Gazette or two daily newspapers – section 458(1) of CAMA.

5.      Notice of appointment of liquidator to the Corporate Affairs Commission – A notice of appointment of the liquidator shall be given to the public and the Commission within fourteen (14) days of the passing of the resolution advertisement in the Gazette or two daily newspapers – section 458(1) of CAMA.

6.      Liquidator shall call a meeting each year – In the event of the winding-up continuing for more than one (1) year, the liquidator shall summon a general meeting of the company at the end of the first year from the commencement of the winding-up, and of each subsequent year and shall lay before the meeting an account of the conduct of the winding up – section 467(1) of CAMA.

7.      Final meeting – As soon as the affairs of the company are fully wound-up, the liquidator shall prepare an account of the winding-up, showing how the winding-up has been conducted and thereupon the liquidator shall call a general meeting of the company for the purpose of laying the account before the meeting – section 468(1) of CAMA.

8.      Dissolution – The Commission on receiving the account and, in respect of the meeting of the creditors and the company shall register them, and on the expiration of three (3) months from the registration, thereof, the company shall be deemed to be dissolved - – section 468(4) of CAMA.

CREDITORS’ VOLUNTARY WINDING-UP

This is where the directors are not able to make a declaration of solvency. The directors must call the meeting of all its creditors – section 471(1) of CAMA. At the meeting, the directors must place before the creditors’ meeting a full statement of the company’s affairs together with a list of their claims – section 471(3)(a) of CAMA. A liquidator must be appointed and on the appointment of the liquidator, all the powers of the directors shall cease forthwith.

PROCEDURE FOR CREDITORS’ VOLUNTARY WINDING-UP

1.      Meeting of company and creditors – The company shall cause a meeting of the creditors of the company to be summoned for the day, or the day next following the day, on which there is to be held the meeting at which the resolution for voluntary winding-up is to be proposed, and shall cause the notice of the said meeting of creditors to be sent to the creditors simultaneously with the sending of the notices of the meeting of the company – section 472(1) of CAMA.

2.      Notice of meeting – The notice is to be published in the Gazette and two newspapers; the publication of the notice is tantamount to a declaration of insolvency – section 472(2) of CAMA.

3.      Chairman of the creditors’ meeting – The meeting of the creditors is to be presided over by one of the directors who shall be appointed from one of them – section 472(3) of CAMA.

4.      Special resolution to wind-up – If the meeting of the company at which the resolution for voluntary winding-up is to be proposed is adjourned and the resolution is passed at an adjourned meeting, any resolution passed at the meeting of the creditors shall have effect as if it had been passed immediately after the passing of the resolution for winding-up of the company – section 472(5) of CAMA.

5.      Appointment of liquidator – The creditors and the company at their respective meetings may nominate (that is, appoint) a person to be a liquidator for the purpose of winding-up of the company, and if the creditor and the company nominate different persons, the person nominated by the creditors shall prevail and such person shall be the liquidator. However, a director, member or the company may apply tom court for an order that the person nominated by the company shall be the liquidator – section 473 of CAMA.

6.      Notice to the Corporate Affairs Commission – The resolution to wind-up the company and appointment of liquidator are given to the Corporate Affairs Commission and published in the Gazette and two newspapers within fourteen (14) days.

7.      Liquidator call meeting each year – In the event of the winding-up continuing for more than one year, the liquidator shall summon a general meeting of the company and a meeting of the creditors at the end of each of the first year from the commencement of the winding-up, and of each subsequent year and shall lay before the meeting an account of the conduct of the winding-up of the company – section 477(1) of CAMA.

8.      Final meeting – As soon as the affairs of the company are fully wound-up, the liquidator shall prepare an account of the winding-up showing how the winding-up has been conducted and thereupon, the liquidator shall call a general meeting of the company and a meeting of the creditors for the purpose of laying the account before the meetings and any explanation – section 478(1) of CAMA.

9.      Dissolution – The commission on receiving the account, and in respect of the meeting of the creditors, and the company shall register them, and on the expiration of three (3) months from the date of registration thereof, the company shall be deemed to be dissolved – section 478(4) of CAMA.

COMMITTEE OF INSPECTION

Under section 474(1) of CAMA, it is provided that the creditors at their meeting, if they think fit, shall appoint a committee of inspection consisting of not more than five (5) persons, and if such a committee is appointed, the company may at a general meeting appoint such number of persons as they think fit not exceeding five (5) persons to join as members of the committee of inspection. However, the creditors, may, if they think fit, resolve that all or any person appointed by the company shall not be members of the committee of inspection, and if the creditors so resolve, the persons mentioned in the resolution shall not unless the court otherwise direct, be qualified to act as members of the committee.

CONSEQUENCES OF A VOLUNTARY WINDING-UP

The consequences of a voluntary winding-up are –

1.      The company shall cease to carry on its business except so far as may be required for the beneficial winding-up thereof.

2.      The corporate status and corporate powers of the company shall however continue notwithstanding anything to the contrary in its articles, until it is dissolved – section 460 of CAMA.

3.      Any transfer of shares not made with the sanction or approval of the liquidator shall be void.

4.      Any alteration in the status of members of the company made after the commencement of the voluntary winding-up shall also be void – section 461 of CAMA.

WINDING-UP SUBJECT TO THE SUPERVISION OF THE COURT

This is provided for under sections 486 to 490 of CAMA. Where the company has passed a resolution for voluntary winding-up, the court may make an order that the voluntary winding-up be subject to the supervision of the court on the strength of a petition or application made to the court – section 486 of CAMA. The court’s order shall be with such liberty for creditors, contributories, or others to apply to the court on such terms and conditions as the court thinks fit.

A winding-up subject to the supervision of the court is deemed to be a winding-up by the court for the purposes of sections 413 and 414 – section 488 of CAMA. Under this type of winding-up, the court may appoint a liquidator by the order or by a subsequent order – section 489(1) of CAMA. The liquidator is usually in addition to the one appointed by the directors and their powers are the same – section 489(2) of CAMA.

The court is also empowered to remove any liquidator so appointed by the court and may fill any vacancy, occasioned by the removal, resignation or death – section 489(3) of CAMA.

EFFECT OF SUPERVISION ORDER

An order for winding-up subject to the supervision of the court has the following effects –

1.      The liquidator so appointed is free to exercise all his powers without the sanction or intervention of the court in the same manner as if the company is being wound-up voluntarily – section 490(1) of CAMA.

2.      The liquidator shall not exercise the powers specified in paragraphs (d), (e) and (f) of section 425(1) of CAMA, that is, the power to pay all classes of creditors in full; the power to make any compromise or arrangement with creditors or persons claiming to be creditors; and the power to compromise all calls, debts and liabilities capable of resulting in debts respectively, except with the sanction of the court – proviso to section 490(1) of CAMA.

3.      A winding-up subject to the supervision of the court does not amount to winding-up by the court for the purpose of the provisions of CAMA as specified in Schedule 12 – section 490(2) of CAMA.

Subject to the provisions contained in Schedule 12, an order for a winding-up subject to supervision of the court shall for all purposes be an order for winding-up by the court.

PROVISIONS APPLICABLE TO EVERY WINDING-UP

1.      Section 491 of CAMA – notice of appointment of liquidator.

2.      Section 492 of CAMA – proof of debts and ranking of claims.

3.      Section 493 of CAMA – application of the bankruptcy rules to insolvent companies.

4.      Section 494 of CAMA – preferential payments.

5.      Section 495 of CAMA – fraudulent preference.

6.      Section 496 of CAMA – liabilities and rights of certain fraudulent preferred persons.

7.      Section 498 of CAMA – effect of floating charge.

8.      Section 499 of CAMA – disclaimer of onerous property.

9.      Section 500 of CAMA – restrictions of rights of creditors as to execution.

10.  Section 501 of CAMA – duty of sheriff as to goods taken in execution.

11.  Section 502 of CAMA – offences by officers.

12.  Section 503 of CAMA – falsification of books.

13.  Section 504 of CAMA – frauds by officer.

14.  Section 505 of CAMA – no proper accounts.

15.  Section 506 of CAMA – fraudulent trading.

16.  Section 507 of CAMA – misfeasance summons.

17.  Sections 508 of CAMA – prosecution of delinquent officers and members.

18.  Sections 509 – 518 of CAMA – supplementary provisions.

19.  Sections 519 – 523 of CAMA – supplementary power of court.

20.  Sections 524 – 526 of CAMA – dissolution provisions.

21.  Sections 527 – 529 of CAMA – central accounts.

22.  Section 530 of CAMA – returns by officers of court.

23.  Section 531 of CAMA – annual accounts of company winding-up and disposal.

MAJOR OFFICERS IN LIQUIDATION AND INSOLVENCY

OFFICIAL RECEIVER

The Deputy Chief Registrar of the Federal High Court or any other Officer designated for the purpose by the Chief Judge of that Court is the Official Receiver – section 419 of CAMA. His duty is to receive the Statement of Affairs of the company and to collate information about the company e.g. the capital, assets and whether there is need for further enquiry concerning the promotion, formation or failure of the company – section 421 of CAMA. He becomes the liquidator when the winding order is made in a compulsory winding up until the appointment of a liquidator – section 422(3)(b) of CAMA, and acts as such whenever there is a vacancy – section 422(1) of CAMA. 

PROVISIONAL LIQUIDATOR

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 its assets, if any, among creditors and contributories in accordance with the articles. He represents the interests of all creditors, especially the unsecured creditors. Upon his appointment, all the powers of the directors cease – section 422(9) of CAMA. 

RECEIVER

A receiver is appointed by secured creditors under power contained in agreement between the company and the creditors. Accordingly he represents the interest of the creditors and his main concern is to release the assets of the company and payoff the debt due to the creditors. When satisfactory discharge of his duty requires that he manages the affairs of the company, he is called a "Receiver and Manager."

A receiver is just to take over the business of the company whilst a manager is to take up the company and try to turn it around to manage it with the aim of generating profits for running the company. A manager has the duty of running the company as a going concern while a receiver does not.

SPECIAL MANAGER

Where the Official Receiver becomes the liquidator of a company, he may apply to the court for an order appointing a Special Manager with such power, including those of Receiver or Manager as the court may invest on him – section 436 of CAMA. The Official Receiver himself may be appointed Special Manager.

ETHICAL ISSUES

1.      Rule 14(1) of Rules of Professional Conduct (RPC), 2004 – A lawyer shall dedicate and devote his time to his client, to act in a manner consistent with the best interests of the client.

2.      Rule 16 of RPC – A lawyer shall represent his client competently.

3.      Rule 31(5) of RPC – except as provided by a rule or order of court, a lawyer shall not deliver to the judge any letter, memorandum, brief or other written communication without concurrently delivering a copy to the opposing lawyer.

(sample of winding-up resolution)

WINDING-UP RESOLUTION

THAT it has been proved to the satisfaction of this meeting that the company cannot by reason of its liabilities continue its business, and that it is advisable to wind-up the same, and accordingly that the company be wound-up voluntarily and that ............................. (name of proposed liquidator) of .................................. (address) be nominated as liquidator for the purpose of such winding-up.

(sample of declaration of solvency)

IN THE FEDERAL HIGH COURT

HOLDING AT ABUJA

                                                                                                            SUIT No.......................

IN THE MATTER OF ......................................................... LIMITED

PRESENTED BY .........................................................

DECLARATION OF SOLVENCY

BROUGHT PURSUANT TO SECTION 462 OF THE COMPANIES AND ALLIED MATTERS ACT 2004; FORM 82 OF THE COMPANIES WINDING-UP RULES 2001; AND THE INHERENT JURISDICTION OF THE COURT

We .................................. of ................................... being all the directors/majority of the directors of ....................................... Limited, do solemnly and sincerely declare that we have made a full enquiry into the affairs of this company, and that, having so done, we have formed the opinion that this company will be able to pay its debts in full within a period of ............................... months from the commencement of the winding-up, and we append a statement of the company’s asset and liabilities as at ...................... 20......... being the latest practicable date before the making of this declaration. And we make this solemn declaration, conscientiously believing the same to be true, and by virtue of the Oaths Act, 2004.

Dated at .................................. the ........................ day of .............. 20.....

BEFORE ME

______________________

COMMISSIONER OF OATHS or NOTARY PUBLIC

(sample of petition for winding-up)

IN THE FEDERAL HIGH COURT

HOLDING AT ABUJA

                                                                                                            SUIT No.......................

IN THE MATTER OF ......................................................... LIMITED

PRESENTED BY ......................................................... (NAME OF PETITIONER)

PETITION FOR WINDING-UP

BROUGHT PURSUANT TO SECTION 410 OF THE COMPANIES AND ALLIED MATTERS ACT, CAP C20, LFN 2004; RULE 15 OF THE COMPANIES WINDING-UP RULES 2001; AND THE INHERENT JURISDICTION OF THE COURT

1.      The .............................................. Limited (hereinafter called the company) was in the month of ..................................... incorporated under the Companies and Allied Matters Act;

2.      The registered office of the company is at ....................................................

3.      The nominal share capital of the company is N.................... divided into ........................ shares of N.................... each. The amount of the capital paid up or credited as paid is N........................................................

4.      The objects for which the company was established are as follows –

a)      ....................................................

b)      ....................................................

c)      ....................................................

And other objects set forth in the memorandum of association thereof.

5.      (state the facts on which the petitioner relies under this paragraph).

6.      The petitioner therefore humbly pray as follows –

a)      That the company may be wound-up by the Court under the provisions of the Companies and Allied Matters Act.

b)      Or that such order be made in the premises as shall be just.