COMPANY LIQUIDATION

Carl T. Abruquah

Mode of winding up

There are two major modes of winding up namely:

By a private liquidation in accordance with the provisions of Part U of the Companies Code.
By an official liquidation in accordance with the provisions of Bodies Corporate (Official
Liquidations) Act 1963 Act 180

Procedure for Private liquidation

Private liquidation commences with the passing of a resolution to the effect that the company is to be
wound up by private liquidation. Liquidation is deemed to commence on date of resolution

Under Section 247 (declaration of solvency) the Directors are required to make an affidavit within five
weeks prior to passing of the resolution for the winding up that they have enquired into the affairs of
the business and have reached a conclusion that the company will be capable of meeting all its debts
and liabilities within a period not exceeding 12 months from the commencement of the winding up.

The affidavit should also embody a statement of the assets and liabilities of the business as at the latest
practicable date before the signing of the affidavit.

Within 14 days copy of resolution should be submitted to the Registrar who will publish the fact in the
Gazette. The financial year will now be deemed to end immediately before commencement of the
winding up. Subsequent financial reports are to comply with the provisions of the code and are to be
circulated among the liquidator, members and debenture holders of the company within three months
of commencement of the winding up.

Additional Provisions

The only business that can be carried on is that which is incidental to the winding up of the
business though the corporate state and corporate powers of the company continues until it is
dissolved
All invoices and letters issued on behalf of the company by any liquidator, receiver or manager
should contain a statement that the company is being wound up under a private liquidation.
Directors are liable to a fine if the grounds for stating that the company would be able to pay its
debts and liabilities were not reasonable.

The liquidator Section 250

Appointment and removal

The resolution for private liquidation will include appointment of a liquidator who should have
consented to be a liquidator. The person should have given prior consent to the appointment.

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 Any vacancies arising from resignation, death or otherwise are to be filled by the company in
general meeting. Such a meeting may be convened by the liquidator or a member.
Any member or the registrar may apply to the court for the removal of a liquidator and
appointment of a new person in place.
The company or the court as the case may be shall provide notice of appointment or removal of
a liquidator and such shall be published in the Gazette.

Remuneration of liquidator section 251

The remuneration of the liquidator is to be made by the appointing authority members in general
meeting or the Court

Disqualifications of Persons From Appointment as liquidator

The following persons are disqualified from

an infant;
any person found by a court of competent jurisdiction to be a person of an unsound mind;
a body corporate;
any person convicted on indictment, whether in Ghana or elsewhere, of any offence involving
fraud or dishonesty or any offence in connection with the promotion, formation or management
of a body corporate;
an undischarged bankrupt or any other person subject to insolvency proceedings under the
Insolvency Act, 2006 (Act 708).
A director of the company under liquidation

An auditor of a company may however be appointed as a liquidator

Nature of Relationship with Company

A liquidator shall have the same fiduciary relationship as a director and the sections applicable to
directors Section 203 to 206 shall be applicable to him

All the powers of the directors shall cease on the appointment of the liquidator except as authorized by
him and as necessary for the preparation of accounts.

Powers of Liquidator

A liquidator under private liquidation shall have the same powers as an Official Liquidator. Where more
than one person is appointed as liquidator, the power may be exercised by such one or more of them or
as may be determined under the appointment, or in default at least two of them.

The Court is also vested with the same powers as in an official liquidation and the liquidator may consult
the Court for direction.

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Books and Accounts During Private Liquidation

A private liquidator is required to keep records and books of account with respect to his dealings and
the conduct of the winding up including all the receipts and payments he has made. Also if he carried on
the business of the company he is required to keep a distinct account of the trading.

Where the winding up continued for more than a year, the liquidator is required to summon a general
meeting before which he will lay before the meeting an account of his dealings in the previous year not
later than three months after the end of the liquidation year. Within 28 days of the meeting, the
Liquidator has to send a copy of the accounts to the Registrar for registration S 256 (4)

Where the affairs are fully wound up the liquidator shall prepare and send to every member an account
showing how the winding up was conducted and the results from trading and how property was
disposed off and shall then convene a general meeting for the purpose of laying before it such account
and of providing the necessary explanations. Within 28 days after such meeting, the liquidator is
required to send to the Registrar, copies of the account and a statement of the holding of the meeting
and its date. If no quorum was present the statement would indicate that the meeting was duly
convened and that no quorum was present thereat.

Under section 256 (5) the records and books of account will be is such format as prescribed by the
Registrar from time to time and must give a true and fair view of the matters recorded and the
administration of the companys affairs during the winding up.

Section 256 (6) the accounts are required to be audited prior to the meeting and the auditors are
required to state whether in their opinion and to the best of their knowledge:

They have obtained the necessary information and explanations necessary for the purpose of
the audit
Proper books of account have been maintained by the liquidator in accordance with the code
Such accounts are in accord with the books, records, provide all the information required by the
code and give a true and fair view of the matters stated.

However, the auditors report will not be required if the liquidator or one of the liquidators is duly
qualified under section 296 for appointment as an auditor of a public company and on or after the
appointment as liquidator the company resolved by special resolution that the account would not be
required to be audited under this section.

The liquidator will be liable if he fails to act in accordance with the provisions of the code to a maximum
fine of fifty pounds.

The code provides for the auditor to preserve the Books and papers for a period of five years from
dissolution of the company and thereafter may destroy them unless the Registrar directs otherwise.

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Liquidation Account

Under section 257 of the Code, the liquidator shall open an account termed the Private Liquidation
Account with a Bank nominated by the Company in General Meeting for the purpose of private
liquidation. All transactions are to be routed through this account.

Furthermore, a person interested in the liquidation may apply to the court for the liquidator to restore
any property lost from the liquidation estate if it appears to the Court that there has been a loss. The
Code compels the liquidator to credit the liquidation account with the value lost.

Duty of Liquidator in the event of solvency

Notice in prescribed form to be submitted to the Registrar to the effect that the company may not be
able to pay its debts in full within the period stated in the affidavit.
The Registrar will then publish a notice of this and where applicable that an order has been made under
section 5 of the Bodies Corporate (Official Liquidations) Act 1963 Act 180

Avenue to apply to the court for stay of liquidation proceedings section 259

While the liquidation is proceeding, the company may by special resolution resolve that the proceedings
be stayed. After passing of the resolution an application may be made by the liquidator or a member to
the court for stay of the liquidation. At least, 28 days prior to the hearing, the applicant must provide
notices to the Registrar, all the directors and the liquidator if he is not an applicant and the Registrar will
cause this to be published in the gazette. All the parties served including the applicant are required to be
present in court on the day of the hearing to call witnesses and to give evidence.

Dissolution of Company on winding up section 260

When the Registrar is satisfied that winding up is complete, he shall strike the name of the company off
the register.

Dissolution without full winding up moribund companies section 261

Section 261 outlines the procedure for the Registrar to strike off the name of a moribund company from
the register. This procedure includes the necessary notices which when not responded to will compel
the Registrar to take action to strike off the companys name from the register.

Official Liquidation

Official Liquidation is governed by the Bodies Corporate (Official Liquidations) Act 1963, Act 180. By
section one of the Act, Official liquidation is commenced in the following manner:

Special resolution of the company.

A petition addressed to the Registrar
A petition to the Court
A conversion from a private liquidation

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Procedure on Resolution section 2

A special resolution of the company will state that the company shall be wound up under official
liquidation
A copy of this resolution will be submitted to the Registrar as soon as practicable who will
publish the fact in the gazette.

Procedure on Petition to Registrar section 3

Section 3 provides that any of the following may petition the Registrar for Official winding up of a
company:

A person who is a creditor; or

A member or contributory to a company
May present a petition to the Registrar for an official liquidation of the company.
The member should have held his shares for six months within the preceding 18 months prior to
the presentation of the petition.

The registrar will make an order for official liquidation if satisfied that the company is unable to pay its
debts under the following circumstances:

Creditor not paid after 21 days of written demand.

Execution or other process issued on judgment, decree or order of any court left unsatisfied.
If it is proved to the satisfaction that the company is unable to pay its debt taking into
consideration also the contingent liabilities and prospective liabilities of the company.

The Registrar will then place a copy of order on the companys file and publish the same in the Gazette

Procedure on petition to court Section 4

Under Section 4 of Act 180 the following may petition the court for official winding up of a company:

The registrar
Creditor
Member or contributory
Attorney General where the objects of the business are unlawful, or the company is operated
for an illegal purpose or the business being carried out is not authorized by its regulations.

The court will make an order for official winding up where:

The company does not within a year from its incorporation commence to carry on all the
businesses which it is authorized by its Regulations to carry on or suspends any of such
businesses for a whole year;
The company has no members;
The business or objects of the company are unlawful or the company is operated for an illegal
purpose or the business being carried on by the company is not authorized by its Regulations;
The company is unable to pay its debts; or

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 The Court is of the opinion that it is just and equitable that the company should be wound up.

Where the petition is presented by members or contributories of the company on the ground that it is
just and equitable that the company should be wound up, the Court, if it is of the opinion,

that the petitioners are entitled to relief either by winding up the company or by some other
means, and
that in the absence of any other remedy it will be just and equitable that the company should be
wound up,
shall make a winding up order unless it is of the opinion, both that some other remedy is
available to the petitioners and that they acted unreasonably in seeking to have the company
wound up instead of pursuing that other remedy.

A copy of the winding up order will be sent to the Registrar which will enter this in the minutes relating
to the company and make a publication in the Gazette.

Procedure on conversion from private liquidation

On notice being given by private liquidator, the Registrar shall make order when satisfied that the
company will not be able to pay its debts. A statement of assets and liabilities of the company is to
accompany this notice.

The Official Liquidator

The Registrar is empowered to act as the Official liquidator under an official liquidation. section 7

Status of Liquidator section 8

The liquidator shall be deemed to stand in a fiduciary relationship with the company and shall
have all the powers of a director and for that matter sections 203 206 shall be applicable to
him
No liability shall attach to liquidator for breach of duty save for reimbursements of money lost
to the company through the liquidators default

Powers of the liquidator

To bring or defend any action or other legal proceedings in the name and on behalf of the
company;
To carry on the business of the company so far as may be necessary for the beneficial winding
up thereof;
To appoint a legal practitioner to assist him in the performance of his duties;
To pay any classes of creditors in full;
To make any compromise or arrangement, subject to the provisions of section 231 of the
Companies Code, 1963, (Act 179) with creditors or persons claiming to be creditors or being or
alleging themselves to have any claims, present or future, certain or contingent, ascertained or
sounding only in damages against the company or whereby the company may be rendered
liable;

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 To compromise all calls and liabilities to calls, debts and liabilities capable of resulting in debts,
and all claims, present or future, certain or contingent, ascertained or sounding only in
damages, subsisting or supposed to subsist between the company and a contributory or alleged
contributory or other debtor or person apprehending liability to the company, and all questions
in any way relating to or affecting the assets or the winding up of the company, on such terms as
may be agreed, and take any security for the discharge of any such call, debt, liability or claim
and give a complete discharge in respect thereof;
To sell the real and personal property and things in action of the company by public auction or
private contract, with power to transfer the whole thereof to any person or company or to sell
the same in parcels;
To do all acts and to execute, in the name and on behalf of the company, all deeds, receipts and
other documents and for that purpose to use when necessary, the company's seal;
To prove and rank the claims in the bankruptcy, insolvency or sequestration of any contributory
for any balance against his estate, and to receive dividends in the bankruptcy, insolvency or
sequestration in respect of that balance, as a separate debt due from the bankrupt or insolvent
and rateably with the other separate creditors;
To draw, accept, make and endorse any bill of exchange or promissory note in the name and on
behalf of the company, with the same effect with respect to the liability of the company as if the
bill or note had been drawn, accepted, made or endorsed by or on behalf of the company in the
course of its business;
To raise on the security of the assets of the company any money requisite;
To take out in his official name letters of administration to any deceased contributory and to do
in his official name any other act necessary for obtaining payment for any money due from the
contributory or his estate which cannot be conveniently done in the name of the company, and
in all such cases the money due shall, for the purposes of enabling the liquidator to take out the
letters of administration or recover the money, be deemed to be due to the liquidator himself;
To do all such other things as may be necessary for winding up the affairs of the company and
the distribution of its assets.

Establishment of Liquidation Funds

Section 12 of Act 180 provides for the establishment of the Liquidation fund through which all
transactions will be routed. The section states as follows:

(1) There shall be a fund, to be known as the Liquidation Fund, into which shall be paid all moneys
received by the liquidator under this Act and to which shall be debited all moneys disbursed by him
thereunder.

(2) There shall be an account within the Liquidation Fund, to be known as the fees account, to which
shall be credited all moneys received by the liquidator by way of fees and other charges.

(3) All payments required or authorised by this Act to be met out of the Liquidation Fund are hereby
charged on that Fund.

Effects of Commencement of Proceedings

Time of commencement.

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 Cessation of directors' functions.
Cessation of company's business.
Custody of company's property.
Prohibition on civil proceedings.
Avoidance of transfer of shares, etc

Commencement of Liquidation

Liquidation is deemed to commence on passing or resolution or date of winding up order depending on

what mode was adopted in proceeding with the liquidation.

Cessation of directors functions section 14

On the commencement of the liquidation all functions are to vest in the liquidator

Cessation of companys business. section 15

The company is to cease business except in so far as is required for the beneficial winding up of the
company

Custody of Company's Property.

Section 16 provides as follows:

(1) Save as may otherwise be directed by the liquidator, the property of a company shall, during
winding up proceedings, remain vested in the company.
(2) Subject to the provisions of the preceding subsection, the liquidator shall take into his custody or
under his control all the property and things in action to which the company is or appears to be
entitled.
(3) Any property in the possession of the company at any time within six months before the
commencement of a winding up shall be presumed to be vested in the company unless the contrary
is shown.
(4) The liquidator may, at any time after the commencement of a winding up, require any member or
contributory and any trustee, receiver, banker, agent or officer of the company to pay, deliver,
convey, surrender or transfer forthwith, or within such reasonable time as the liquidator may
direct, to the liquidator any money, property or books and papers in his hands to which the
company is prima facie entitled.

Investigation into Affairs of Company (See Sections 19-27 of Act 180)

Statement of affairs.
Settlement of list of contributories -
Rectification of register of members.
Proof of debt.
First meeting of creditors.
Private examination by the Court.
Examination of fraudulent or delinquent persons.

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 Order against fraudulent or delinquent persons.
Consequences of order.

General Duties of Liquidator in Administration of Companys Property

Duty to collect debts section 36

Duty to vest property in liquidator section 37
Duty to realize assets section 38
Duty to verify ranking for dividends section 39
Duty to amend admitted proofs section 40
Duty to ascertain priority of debts section 41
Duty to consult creditors or members section 42

Publicity

Section 57 notification of fact of liquidation on every invoice and business letter

Dissolution and Striking Office

Under Section 50 when the Registrar is satisfied that winding up has been completed, he will strike off
the name of the company from the register and the company is thereby dissolve.

Ranking of Company Debt

Section 41 provides for the following classes of debt:

Class A 4 months wages not exceeding 150 pounds

Class A rates and taxes due and payable in the financial year preceding winding up
Class A debts have priority over debts covered by floating charges
Class B any other unsecured debt
Class C owed to director or former director or relative