Grounds and effect of winding-up petition
122. Circumstances in which company may be wound up by the court
(1) A company may be wound up by the court if -
(a) the company has by special resolution resolved that the company be wound up by the court,
(b) being a public company which was registered as such on its original incorporation, the company has not been issued under section 117 of the Companies Act (public company share capital requirements) and more than a year has expired since it was so registered,
it is an old public company, within the meaning of the Consequential Provisions Act,
(d) the company does not commence its business within a year from its incorporation or suspends its business for a whole year.
(e)except in the case of a private company limited by shares or by guarantee the number of members is reduced below 2,
(f) the company is unable to pay its debts,
(g) the court is of the opinion that it is just and equitable that the company should be wound up.
(2) In Scotland, a company which the Court of Session has jurisdiction to wind up may be wound up by the Court if there is subsisting a floating charge over property comprised in the company's property and undertaking, and the court is satisfied that the security of the creditor entitled to the benefit of the floating charge is in jeopardy.
For this purpose a creditors' security is deemed to be in jeopardy if the Court is satisfied that events have occurred or are about to occur which render it unreasonably in the creditor's interests that the company should retain power to dispose of the property which subject to the floating charge.
123. Definition of inability to pay debts
(1) A company is deemed unable to pay its debts -
(a) of a creditor (by assignment or otherwise) to whom the company is indebted in a sum exceeding £750 then due has served on the company, by leaving it at the company's registered office, a written demand (in the prescribed form) requiring the company to pay the sum so due and the company has for 3 weeks there-after neglected to pay the sum or to secure or compound for it to the reasonable satisfaction of the creditor, or
(b) if, in England and Wales, execution or other process issued on a judgment, decree or order of any court in favour of a creditor of the company is returned unsatisfied in whole or in part, or
(c) if, in Scotland, the induciae of a charge for payment on an extract decree, or an extract registered bond, or an extract registered protest, have expired without payment being made, or
(d) if, in Northern Ireland, a certificate of unenforceability has been granted in respect of a judgment against the company, or
(e) if it is proved to the satisfaction of the court that the company is unable to pay its debts as they fall due.
(2) A company is also deemed unable to pay its debts if it is proved to the satisfaction of the court that the value of the company's assets is less than the amount of its liabilities, taking into account its contingent and prospective liabilities.
(3) The money sum for the time being specified in subsection (1)(a) is subject to increase or reduction by order under section 416 in Part XV.
124. Application for winding up
(1) Subject to the provisions of this section, an application to the court for the winding up of a company shall be by petition presented either by the company, or the directors, or by any creditor or creditors (including any contingent or prospective creditor or creditors), contributory or contributories or by clerk of a magistrates' court in the exercise of the power conferred by section 87A of the Magistrates' Courts Act 1980 (enforcement of fines imposed on companies, or by all or any of those parties, together or separately.
(2) Except as mentioned below, a contributory is not entitled to present a winding-up petition unless either -
(a) the number of members is reduced below 2, or
(b) the shares in respect of which he is a contributory, or some of them, either were originally allotted to him, or have been held by him, and registered in his name, for at least 6 months during the 18 months before the commencement of the winding up, or have devolved on him through the death of a former holder.
(3) A person who is liable under section 76 to contribute to a company's assets in the event of its being wound up may petition on either of the grounds set out in section 122(1)(f) and (g), and subsection (2) does not then apply; but unless the person is a contributory otherwise than under section 76, he may not in his character as contributory petition on any other ground.
This subsection is deemed included in Chapter VII or Part V of the Companies Act (redeemable shares; purchase by a company of its own shares) for the purposes of the Secretary of State's power to make regulations under section 179 of that Act.
(4) A winding-up petition may be presented by the Secretary of State -
(a) if the ground of the petition is that in section 122(1)(b) or (c), or
(b) in a case falling within section 124A below.
(5) Where a company is being wound up voluntarily in England and Wales, a winding-up petition may be presented by the official receiver attached to the court as well as by any other person authorised in that behalf under the other provisions of this section; but the court shall not make a winding-up order on the petition unless it is satisfied that the voluntary winding up cannot be continued with due regard to the interests of the creditors or contributories.
124A. Petition for winding up on grounds of public interest
(1) Where it appears to the Secretary of State from -
(a) any report made or information obtained under Part XIV of the Companies Act 1985 (company investigations, etc.),
(b) any report made under section 94 or 177 of the Financial Services Act 1986 or any information obtained under section 105 of that Act.
(c) any information obtained under section 2 of the Criminal Justice Act 1987 or section 52 of the Criminal Justice (Scotland) Act 1987 (fraud investigations), or
(d) any information obtained under section 83 of the Companies Act 1989 (powers exercisable for purpose of assisting overseas regulatory authorities),
that it is expedient in the public interest that a company should be wound up, he may present a petition for it to be wound up if the court thinks it just and equitable for it to be so.
(2) (Non-application). This section does not apply if the company is already being wound up by the court.
125. Powers of court on hearing of petition
(1) On hearing a winding-up petition the court may dismiss it, or adjourn the hearing conditionally or unconditional, or make an interim order, or any other order that it thinks fit; but the court shall not refuse to make a winding-up order on the ground only that the company's assets have been mortgaged to an amount equal to or in excess of those assets, or that the company has no assets.
(2) If the petition is presented by members of the company as contributories on the ground that it is just and equitable that the company should be wound up, the court if it is of the option -
(a) that the petitioners are entitled to relief either by winding up the company or by some other means, and
(b) that in the absence of any other remedy it would be just and equitable that the company should be wound up,
shall make a winding-up order; but this does not apply if the court is also of the opinion both that some other remedy is available to the petitioners and that they are acting unreasonably in seeking to have the company wound up instead of pursuing that other remedy.
126. Power to stay or restrain proceedings against company
(1) At any time after the presentation of a winding-up petition, and before a winding-up order has been made, the company, or any creditor or contributory, may -
(a) where any action or proceeding against the company is pending in the High Court or Court of Appeal in England and Wales or Northern Ireland, apply to the court in which the action or proceeding is pending for stay of proceedings therein, and
(b) where any other action or proceeding is pending against the company, apply to the court having jurisdiction to wind up the company to restrain further proceedings in the action or proceeding;
and the court to which application is so made may (as the case may be) stay, sist or restrain the proceedings accordingly on such terms as it thinks fit.
(2) In the case of a company registered under section 680 of the Companies Act (pre-1862 companies; companies formed under legislation other than the Companies Acts) or the previous corresponding legislation, where the application to stay, sist or restrain is by a creditor, this section extends to actions and proceedings against any contributory of the company.
127. Avoidance of property dispositions
In a winding up by the court, any disposition of company's property, and any transfer of shares, or alteration in the status of the company's members, made after the commencement of the winding up is, unless the court otherwise orders, void.
128. Avoidance of attachments etc
(1) Where a company registered in England and Wales is being wound up by the court, any attachment, sequestration, distress or execution put in force against the estate or effects of the company after the commencement of the winding up is void.
(2) This section, so far relates to any estate of the company situated in England and Wales, applies in the case of a company registered in Scotland as it applies in the case of a company registered in England and Wales.
Commencement of winding up
129. Commencement of winding up by the court
(1) If, before the presentation of a petition for the winding up of a company by the court, a resolution has been passed by the company for voluntary winding up, the winding up of the company is deemed to have commenced at the time of the passing of the resolution; and unless the court, on proof of fraud or mistake, directs otherwise, all proceedings taken in the voluntary winding up are deemed to have been validly taken.
(2) In any other case, the winding up of a company by the court is deemed to commence at the time of the presentation of the petition for winding up.
130. Consequences of winding-up order
(1) On the making of a winding-up order, a copy of the order must forthwith be forwarded by the company otherwise as may be prescribed) to the registrar of companies, who shall enter it in his records relating to the company.
(2) When a winding-up order has been made or a provisional liquidator has been appointed, no action or proceeding shall be proceeded with or commenced against the company or its property, except by leave of the court and subject to such terms as the court may impose.
(3) When an order has been made for winding up a company registered under section 680 of the Companies Act, no action or proceeding shall be commenced or proceeded with against the company or its property or any contributory of the company, in respect of any debt of the company, except by leave of the court, and subject to such terms as the court may impose.
(4) An order for winding up a company operates in favour of all the creditors and of all the contributories of the company as made on the joint petition of a creditor and of a contributory.
Investigation Procedures
131. Company's statement of affairs
(1) Where the court has made a winding-up order or appointed a provisional liquidator, the official receiver may require some or all of the persons mentioned in subsection (3) below to make out and submit to him a statement in the prescribed form as to the affairs of the company.
(2) The statement shall be verified by affidavit by the persons required to submit it and shall show -
(a) particulars of the company's assets, debts and liabilities;
(b) the names and addresses of the company's creditors;
the securities held by them respectively;
(d) the dates when the securities were respectively give; and
(e) such further or other information as may be prescribed or as the official receiver may require.
(3) The persons referred to in subsection (1) are -
(a) those who are or have been officers of the company;
(b) those who have taken part in the formation of the company at any time within one year before the relevant date;
(c) those who are in the company's employment, or have been in its employment within that year, and are in the official receiver's opinion capable of giving the information required;
(d) those who are or have been within that year officers of, or in the employment of, a company which is, or within that year was, an officer of the company.
(4) Where any persons are required under this section to submit a statement of affairs to the official receiver, they shall do so (subject to the next subsection) before the end of the period of 21 days beginning with the day after that on which the prescribed notice of the requirement is given to them by the official receiver.
(5) The official receiver, if he thinks fit, may -
(a) at any time release a person from an obligation imposed on him under subsection (1) or (2) above; or
(b) either when giving the notice mentioned in subsection (4) or subsequently, extended the period so mentioned;
and where the official receiver has refused to exercise a power conferred by this section, the court, if it thinks fit, may exercise it.
(6) In this section -
"employment" includes employment under a contract for services; and
"the relevant date" means -
(a) in a case where a provisional liquidator is appointed, the date of his appointment; and
(b) in a case where no such appointment is made, the date of the winding-up order.
(7) If a person without reasonable excuse fails to comply with any obligation imposed under this section, he is liable to a fine and, for continued contravention, to a daily default fine.
(8) In the application of this section to Scotland references to the official receiver are to the liquidator or, in a case where a provisional liquidator is appointed, the provisional liquidator.
132. Investigation by official receiver
(1) Where a winding-up order is made by the court in England and Wales, it is the duty of the official receiver to investigate -
(a) if the company has failed, the causes of the failure; and
(b) generally, the promotion, formation, business, dealings and affairs of the company,
and to make such report (if any) to the court as he thinks fit.
(2) The report is, in any proceedings, prima facie evidence of the facts stated in it.
133. Public examination of officers
(1) Where a company is being wound up by the court, the official receiver or, in Scotland, the liquidator may at any time before the dissolution of the company apply to the court for the public examination of any person who -
(a) is or has been an officer of the company; or
(b) has acted as liquidator or administrator of the company or as receiver or manager or, in Scotland, receiver of its property; or
(c) not being a person falling within paragraph (a) or (b), is or has been concerned, or has taken part, in the promotion, formation or management of the company.
(2) Unless the court otherwise orders, the official receiver or, in Scotland, the liquidator shall make an application under subsection (1) if he is requested in accordance with the rules ro do so by -
(a) one-half, in value, of the company's creditors; or
(b) three-quarters, in value, of the company's contributories.
(3) On an application under subsection (1), the court shall direct that a public examination of the person to whom the application relates shall be held on a day appointed by the court; and that person shall attend on that day and be publicly examined as to the promotion formation or management of the company or as to the conduct of its business and affairs, or his conduct or dealings in relation to the company.
(4) The following may take part in the public examination of a person under this section and may question that person concerning the matters mentioned in subsection (3), namely -
(a) the official receiver;
(b) the liquidator of the company;
(c) any person who has been appointed as special manager of the company's property or business;
(d) any creditor of the company who has tendered a proof or, in Scotland, submitted a claim in the winding up;
(e) any contributory of the company.
134. Enforcement of Section 133
(1) If a person without reasonable excuse fails at any time to attend his public examination under section 133, he is guilty of a contempt of court and liable to be punished accordingly.
(2) In a case where a person without reasonable excuse fails at any time to attend his examination under section 133 or there are reasonable grounds for believing that a person has absconded, or is about to abscond, with a view to avoiding or delaying his examination under that section, the court may cause a warrant to be issued to a constable or prescribed officer of the court -
(a) for the arrest of that person; and
(b) for the seizure of any books, papers, records, money or goods in that persons possession.
(3) In such a case the court may authorise the person arrested under the warrant to be kept in custody, and anything seized under such a warrant to be held, in accordance with the rules, until such time as the court may order.
Top | Winding up by the court | Next Page | IA 1986 Index