May 2019 Q7

Liquidation may be defined as a legal process by which a company or other body corporate is dissolved. The activities of the organization are wound up and its assets either distributed or converted into cash or other consideration and shared amongst the members and other persons having legally justified claims against the company.
The winding up of a company may take two forms:

• By an official liquidation in accordance with provisions of the Bodies Corporate (Official liquidations) Act 1963 (Act 180) or
• By a private liquidation i.e. on the strength of a special resolution passed by the company

• The striking of the company’s name off the register by the Registrar and notifying the same in the Gazette under Section 260 of the Act as representing the burial of the Company.
• The company is obliged to cease operations from the commencement of the winding up except in so far as may be required for the beneficial winding up of the company.
• The corporate state of the company, its legal personality as well as its corporate powers continues until the company is dissolved.
• Where a company is being wound up by way of a private liquidation, every invoice, and order or business letter bearing the company name, issued by or on behalf of the company or any liquidator of the company or any receiver or manager of any property of the company must contain a statement that the company is being wound up. (Section 246)
• A private liquidation is deemed to commence at the time of the passing of the requisite resolution and within 14 days after the passing of the resolution, the Registrar must be furnished.
• The appointment of a liquidator for the purposes of a private liquidation automatically implies the cessation of all powers and authority of the board of directors and the vesting of such powers and authority in the liquidator (Section 254) who is deemed to stand in a fiduciary relationship as if he were a director to stand in a fiduciary relation.