WINDING UP OF A COMPANY IN NIGERIA
DISSOLUTION OF A COMPANY
Winding up of a company in Nigeria is the liquidation and dissolution process of any given company in Nigeria. It is a decision that is collectively settled by the company to end the existence of such company, consequently leading to the distribution of the company’s assets for the benefits of the creditors and members of the company. The petition for winding up of a company can also be initiated by the creditors of the company. However, the procedure for voluntary winding up of a company in Nigeria could be carried out in any of these three different modes, which are, (1) Voluntarily, (2) By the Order of the Court, or, (3) Subject to the supervision of the Court.
THE REGULATING LAWS RELATING TO WINDING UP PROCEDURE IN NIGERIA
- Companies and Allied Matters Act
- Companies Proceedings Rules
- Companies Winding up Rules
- Federal High Court (Civil Procedure) Rules and Act
- Investments and Securities Act. Etc.
VOLUNTARY WINDING UP OF A COMPANY IN NIGERIA
This article will essentially focus on the voluntary winding up of a company with specific referencing to the sections 457- 485 of the Companies and Allied Matters Act.
The Sections 457 of the Act provides two instances by which a voluntary winding up could occur, with the first being when the period, if any, fixed by the articles of the company stipulates the duration the company is to exist and same subsequently expires, or if the article base the existence of the company on some future event and same subsequently occurs; the company at its general meeting may pass A resolution requiring the company to be wound up voluntarily.
Secondly, if the company decides on its own to terminate its existence, members of the company may by the passage of a Special Resolution at the general meeting of the company wind up the company voluntarily.
PROCESS FOR VOLUNTARY WINDING UP OF A COMPANY
There are two types of procedures that can be used to voluntarily wind to a company in Nigeria. The procedures include the following:
- A Members winding up (i.e. where the company is solvent and can pay its debt in full within such period not exceeding twelve months from the commencement of the winding up). Sections 464- 470; Or
- A Creditors winding up (I.e. if the company is insolvent and the creditors of the company would have to take charge of the liquidation process) as provided for under sections 472- 478 of the Act.
PROCEDURE FOR A COMPANY VOLUNTARY WINDING-UP BY MEMBERS
- The company at a general meeting would pass a special resolution proposing to wind up the company, and at this meeting would appoint one or more liquidators for the process. The appointed liquidator may be a corporate lawyer or professional such as an accountant with the good knowledge of the winding up laws and procedures.
- The company shall give notice of the special resolution passed to the Corporate Affairs Commission (CAC) within 14 days of its passage and also advertise it in the official gazette or in two daily newspapers. Section 458 (2)
- A statutory Declaration of solvency must be made by the directors or majority of the directors within 5 weeks immediately preceding the date of the passing of the special resolution for winding up the company. Section 462 (1),(2)(a)
- The company must thereafter cease to carry out business after the resolution for winding up has been passed, and the powers of the directors’ ceased upon the appointment of the liquidator unless the company in a general meeting or the liquidator allows the continuance of it. Section 464(2)
- In the event the winding up process last for more than a year, the liquidator is to hold a meeting at the end of each year, and these meetings should be called to notice by publishing it in the official gazette and in some newspapers printed in Nigeria.
- The liquidator is to hold final meetings upon liquidation of the company and a copy of the accounts/returns of the meeting sent to the Corporate Affairs Commission within 7days of the meetings for registration. Section 468 (3)
- As soon as the affairs of the company are fully wound-up the liquidator is to prepare, send and convene a meeting for the purpose of laying before it the financial accounts of the winding up, thus showing how the winding up was conducted and result of any trading during this period. Section 470 (3)
- The liquidator is required to preserve all books/papers/documentation of the company on his activities as a liquidator for a period of 5 years before any destruction or otherwise directed by the commission in such event shall not destroy same until the CAC consents in writing. Section 470(8)
- The liquidator shall within 28 days after this meeting sends to the Corporate Affairs Commission the copies of the accounts and a statement of holding of meeting and dates for registration. Section 470 (4)
- The liquidator is thereafter to finally apply for dissolution order and send same to the commission. It should be noted that the company is deemed dissolved after 3 months of the registration of the accounts/returns with the Corporate Affairs Commission in accordance with the Sections 478(4)
PROCEDURE FOR VOLUNTARY WINDING UP BY CREDITORS OF COMPANY
- Both the Company and its Creditors would hold separate meetings to propose for a winding up of the company. In this case, the company must call the meeting of the creditors on the same day or the next day after. Section 472(1)
- The Creditors and the Company at their respective meetings may nominate a person to be the liquidator of the winding up process. However, the person nominated by the Creditors will be the liquidator if different persons were nominated at the two meetings. Meanwhile, any director, member, or creditor may apply to the court to order otherwise. Section 473(1)
- The Creditors at their meeting may, if they think fit, appoint a committee of inspection of not more than 5 persons. The Company may also appoint not more than 5 persons to the committee but the creditor may reject such persons so appointed by the Company.
- The liquidator shall within 14 days of his appointment publish it in the official gazette and 2 daily newspapers and he is to deliver same to the commission for registration a Notice of his appointment. Section 477
- The liquidator shall make publications of notice of the final meeting and the account of the liquidation is laid before and approved by the meeting. And after this meeting, the liquidator must within 7 days sends a copy of the account and return holding of the meeting to the Corporate Affairs Commission.
- The company is subsequently deemed dissolved after 3 months of the registration of the accounts and return to the commission, Section 478(4). However, the Court upon an application by the liquidator, member, or creditor can defer the date, which the dissolution is to take effect.
In conclusion, it is noteworthy that the moment a company voluntarily decides to wind itself up, there are effects and consequences of such action being carried out towards the structure of the company. In this case, the company will cease to carry on its business except so far as may be required for the beneficial winding up of the company. It should be noted that the company still remains a corporate entity with its corporate powers (unless its articles provide otherwise) or until it is finally dissolved.
However any transfer of shares without the sanction of the liquidator, and any alteration on the status of members of the company made after the commencement of a voluntary winding up shall be void, as provided under the Section 461 of the Company and Allied Matters Act.
By the Corporate & Commercial Law Department at the Resolution Law Firm, Nigeria