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.

• On notice being given by the liquidator under private liquidation to the Registrar (of Companies) that the company may not be able to pay its debts and liabilities in full within the period stated in the declaration of insolvency, the Registrar may make a winding- up order converting the private liquidation into an official winding-up.
• The allegation that the Company is unable to pay its debt in full within the stated period shall be accompanied by a statement in the prescribed form of the company’s assets and liabilities.
• On the commencement of winding-up proceedings against a company, civil proceedings against the company shall be stayed and a transfer of shares of the company is void.
  Section 5 of the Bodies Corporate (Official Liquidations) Act, 1963 ACT 180

Situations in which a company can be ordered to be wound up

• Suspension of authorized business for a whole year
• Company has no members
• Business or objects of the company are unlawful
• Company is operating an illegal purpose
• Company is unable to pay its debts
• If court determines that it is just and equitable
                                                                                                                                                                                  (Any 4 points)

A resolution is a special resolution under section 168 of ACT 179 is when it is passed by not less than three-fourths of the votes cast by the members of the company who being entitled so to do vote in person or, where proxies are allowed by proxy at a general meeting of which, notice specifying the intention to propose the resolution as a special resolution, has been duly given

• An infant;
• A person found by a court of competent jurisdiction to be a person of an unsound mind;
• A body corporate;
• A person convicted on indictment, whether in the Republic or elsewhere of an offence involving fraud or dishonesty or of an offence in connection with the promotion or management of a body corporate;
• An undischarged bankrupt or any other person subject to insolvency proceedings under the Insolvency Act, 1962 ACT 153
• A director of a company is not qualified for appointment as a liquidator of that company.
• An auditor of a company shall not be appointed as liquidator in a private liquidation unless on the appointment, a special resolution is duly passed dispensing with the auditing of the accounts of that auditor.

• The liquidator must keep proper records and books of account for all transactions in respecting the winding up. Should the liquidator carry on the business of the company, she should keep a distinct account of the trading.
• Should winding up proceed beyond 12 months she should shortly thereafter, and no later than 3 months following unless the Registrar extends this period, summon a general meeting of the company and lay before the meeting an account of the liquidator’s acts and dealings and of any trading the business may have conducted while winding up was pending.
• Within 28 days after the said general meeting, the liquidator shall send a copy of the accounts to the company Registrar for Registration.
• As soon as the affairs of the company are fully wound up, the liquidator shall prepare and send to every member of the company the final audited accounts of the winding up showing how the winding up was conducted, the results of trading, and how the property of the company was disposed of.
• After dispatching these final audited accounts, the liquidator shall convene a general meeting of the company to lay before the meeting her accounts and offer any explanations.
• Within 28 days of that general meeting, the liquidator shall send to the Registrar copies of the accounts and a statement of the holding of the meeting and the meeting date for registration.
• The liquidator must settle the accounts of the Company.
• The liquidator will invite the creditors and debtors to present their statements to him.
• The liquidator will rank the debts and pay creditors.
• The liquidator will serve notice to creditors and debtors.
• The liquidator stands in fiduciary relations with the liquidated company.
• Realise the assets of the Company.
• The liquidator is required to preserve the books and papers of the company and of the liquidator for 5 years from the company’s dissolution.
  Section 256 of the Companies Act, 1963 ACT 179

• Conversion from a private liquidation
• Special resolution
• Petition addressed to the Registrar
• Petition to the Court

• A member of a company with shares is liable, prior to the dissolution of the company, to contribute the balance, if any, of the amount payable in respect of shares held by him or her in accordance with the terms of the agreement under which the shares were issued and acquired, or in accordance with a call validly made by the company in accordance with the company’s regulations.
• Where any contribution has become due and payable or where under the terms of any agreement with the company, a member has undertaken personal liability to make future payment in respect of shares issued to him/her.

i) Duty to vest in the liquidator by notice in the Gazette that all properties of the company shall vest in him.
ii) Duty to sell the assets so that the monies so realized could be used for distribution to creditors.
iii) Duty to verify debts by meeting with creditors to proof their claim.
iv) Duty to amend or alter claim or rectify admitted values or amount.
v) Determine the priority of debt so the most priority debts are settled first.
vi) Duty to consult creditors and members to discuss relevant matters.

                                                                                                                                                    (3 Marks each for any five points)