winding up
JAN 2012 (7b)
State the effects of the commencement of the winding up on the creditors, the company and the employees.
Winding up is the process to bring an end the existence of the company. It is also known as liquidation. When a company is liquidated, its structure survives the appointment of a liquidator, but not the liquidation. Control of assets, conducting business, and other financial affairs are transferred to the liquidator. The directors cease to have any authority. All bank accounts are frozen, any employment can be terminated.
For creditors, after commencement, Section 223 stated that any disposition of company’s property including things in action and any transfer of shares or alteration in the status of the members of the company made after the commencement of the winding up by the court shall unless the court otherwise orders be void. Any attachment, sequestration, distress or execution put in force against the estate or effects of the company after the commencement of the winding up by the court shall be void (Section 224 of Company Act 1965). It means that they cannot enforce judgement or orders they obtained after the commencement of winding up. After commencement, winding up usually treated as default allowing secured creditor to uplift and sell company assets over which they have security. When there is any shortfall, the secured creditor should file a proof of debt and in such an instance, the status is changed to an unsecured creditor. However, if there is any surplus after deducting the secured creditor's debts, the secured creditor has to give the remaining proceeds to the liquidator to be put in the company's estate.
For company, Section 256(1) stated that the company shall from the commencement of the winding up cease to carry on its business, except so far as may be necessary for the beneficial winding-up thereof but the corporate state and corporate powers of the company shall notwithstanding anything to the contrary in its articles,
State the effects of the commencement of the winding up on the creditors, the company and the employees.
Winding up is the process to bring an end the existence of the company. It is also known as liquidation. When a company is liquidated, its structure survives the appointment of a liquidator, but not the liquidation. Control of assets, conducting business, and other financial affairs are transferred to the liquidator. The directors cease to have any authority. All bank accounts are frozen, any employment can be terminated.
For creditors, after commencement, Section 223 stated that any disposition of company’s property including things in action and any transfer of shares or alteration in the status of the members of the company made after the commencement of the winding up by the court shall unless the court otherwise orders be void. Any attachment, sequestration, distress or execution put in force against the estate or effects of the company after the commencement of the winding up by the court shall be void (Section 224 of Company Act 1965). It means that they cannot enforce judgement or orders they obtained after the commencement of winding up. After commencement, winding up usually treated as default allowing secured creditor to uplift and sell company assets over which they have security. When there is any shortfall, the secured creditor should file a proof of debt and in such an instance, the status is changed to an unsecured creditor. However, if there is any surplus after deducting the secured creditor's debts, the secured creditor has to give the remaining proceeds to the liquidator to be put in the company's estate.
For company, Section 256(1) stated that the company shall from the commencement of the winding up cease to carry on its business, except so far as may be necessary for the beneficial winding-up thereof but the corporate state and corporate powers of the company shall notwithstanding anything to the contrary in its articles,