ACCA F4 - Corp and Business Law (ENG)

324 21: Insolvency and administration  Part G Legal implications of companies in difficulty or in crisis

The main differences between a members' and a creditors' voluntary winding up are set out below.

Winding up

Function Members' voluntary Creditors' voluntary

(1) Appointment of liquidator By members Normally by creditors though

responsible to both members

and creditors

(2) Approval for liquidator's

actions

General meeting of members Liquidation committee

(3) Liquidation committee None Up to five representatives of

creditors

The effect of the voluntary winding up being a creditors' one is that the creditors have a decisive

influence on the conduct of the liquidation.

Meetings in a creditors' voluntary winding up are held in the same sequence as in a members' voluntary

winding up, but meetings of creditors are called at the same intervals as the meetings of members and for

similar purposes.

In both kinds of voluntary winding up, the court has the power to appoint a liquidator (if for some reason

there is none acting) or to remove one liquidator and appoint another.

2.1 Members' voluntary liquidation

In order to be a members' winding up, the directors must make a declaration of solvency. It is a criminal

offence to make a declaration of solvency without reasonable grounds.

Type of resolution to be passed

Ordinary This is rare, but if the articles specify liquidation at a certain point, only an ordinary

resolution is required

Special A company may resolve to be wound up by special resolution

The winding up commences on the passing of the resolution. A signed copy of the resolution must be

delivered to the Registrar within 15 days. A liquidator is usually appointed by the same resolution (or a

second resolution passed at the same time).

2.1.1 Declaration of solvency

A voluntary winding up is a members' voluntary winding up only if the directors make and deliver to the

Registrar a declaration of solvency.

This is a statutory declaration that the directors have made full enquiry into the affairs of the company

and are of the opinion that it will be able to pay its debts, within a specified period not exceeding 12

months.

(a) The declaration is made by all the directors or, if there are more than two directors, by a majority

of them.

(b) The declaration includes a statement of the company's assets and liabilities as at the latest

practicable date before the declaration is made.

(c) The declaration must be:

(i) Made not more than five weeks before the resolution to wind up is passed, and

(ii) Delivered to the Registrar within 15 days after the meeting.

If the liquidator later concludes that the company will be unable to pay its debts they must call a meeting

of creditors and lay before them a statement of assets and liabilities.

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