A company may be wound up compulsorily by the Court under Chap. XVI. the following circumstances :—1

(1.) Whenever the company has passed a special resolution requiring the company to be wound up by the Court:

(2.) Whenever the company does not commence its business within a year from its incorporation, or suspends its business for the space of a whole year:

(3.) Whenever the members are reduced in number to less than

seven :

(4.) Whenever the company is unable to pay its debts: (5.) Whenever the Court is of opinion that it is just and equitable that the company should be wound up.

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2

Winding-up by the Court.

unable to pay

debts.

A company is deemed to be unable to pay its debts whenever a Company creditor (by assignment or otherwise) for an amount exceeding 501. has served on the company a demand for payment, and the company has for three weeks after such service neglected to pay the debt or to secure or compound for it; or execution by a judgment creditor is returned unsatisfied; or it is proved to the satisfaction of the Court that the company is unable to pay its debts. 4

5

6

An application for a winding-up order is to be made by petition, which may be presented by the company itself, or by any one or more creditor or creditors, contributory or contributories, of the company. For this purpose a shareholder who has paid up in full is a "contributory ";" and a shareholder, the calls upon whose shares are in arrear, may, on certain terms, present a petition. The right of a contributory to petition cannot be limited or excluded by the articles. A debenture-holder may present a petition.9

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Who may petition.

The winding-up is deemed to commence at the time of the Commence

ment of winding-up.

Chap. XVI. presentation of the petition.1 When a winding-up order has been made, no action or other proceeding can be brought or proceeded with against the company without the leave of the Court; and dispositions of property of the company, or transfers of shares, made between the commencement of the winding-up and the winding-up order are void, unless the Court otherwise orders.3

Liquidators.

"Contributory,"

-past

member.

4

For the purpose of conducting the proceedings in winding-up and assisting the Court therein, a liquidator or liquidators may be appointed by the Court, and until a liquidator is appointed under the Act of 1890, the official receiver attached to the Court for bankruptcy purposes is provisional liquidator.

It should be noted that the property of the company does not vest in the liquidator, and therefore conveyances of it must be made by the liquidator in the name of the company and under its seal.6

The term "contributory" means every person liable, or alleged to be liable before the final determination of the list of contributories, to contribute to the assets of the company in the event of its being wound up; and the persons so liable to contribute are all present and past members of the company, subject to the qualifications that:

(1.) No past member is so liable if he has ceased to be a member for one year or upwards prior to the commencement of the windingup;

(2.) No past member is liable to contribute in respect of any debt or liability of the company contracted after he ceased to be a member; (3.) No past member is liable to contribute unless the existing members are unable to satisfy the contributions required to be made by them;

(4.) In the case of a company limited by shares, no contribution is to be required from any member exceeding the amount (if any) unpaid on the shares in respect of which he is liable, or in the case of a company limited by guarantee, exceeding the amount of the undertaking entered into on his behalf by the memorandum of association.

A "member" is a person who has agreed to become a member, Chap. XVI. and whose name is entered on the register of members.1 Sub- Members.

scribers of the memorandum of association are deemed to have agreed to become members. A member whose shares have been forfeited under articles of association providing that forfeiture shall determine his membership, but not his liability for calls due at the time of the forfeiture, is not liable as a contributory but is liable as a debtor.?

tories.

Entry on the register is a condition precedent to liability as a Contribumember. The list of contributories is settled by the Court, Rectification which has power to rectify the register by removing or inserting of register. names.* For instance, the name of a director who is bound to take qualifying shares, but has not done so," will be inserted, and the name of a person who has been induced to take shares as security upon the representation that they were "fully paid," or has taken them under a mistake as to the identity of the company,7 will be removed.

The list consists of two parts, first, the list of present members as at the commencement of the winding-up, which is commonly called the "A list," and, secondly, the list of past members who have ceased to be members within a year before the commencement of the winding-up, which is commonly called the "B list."

If a registered shareholder seeks to escape liability as a contributory in the winding-up on the ground that he was induced to take the shares by fraud or misrepresentation, he must rescind his contract or repudiate the shares within a reasonable time; but it will be too late after proceedings for winding-up have been commenced, unless he has taken some active steps to rescind before the commencement of the winding-up.8

The practical differences (apart from the Companies (Windingup) Act, 1890) between a compulsory winding-up by the Court

Difference

between compulsory and voluntary winding-up.

Chap. XVI. and a voluntary winding-up by the shareholders are that, in a winding-up by the Court, the liquidator is appointed by and is an officer of the Court, and is obliged to consult and obtain the sanction of the judge or his chief clerk before exercising his powers, and this necessarily causes some delay and often considerable expense; whereas, in a voluntary winding-up, the liquidator is appointed by the members and can act on his own discretion without going to the Court, though he may, if he pleases, apply to the Court to determine any question arising in the winding-up, or to exercise powers which the liquidator does not possess.1

Voluntary winding-up.

Winding-up subject to

A voluntary winding-up is often resorted to for the purpose of dissolving the company with a view to its reconstruction on a different basis, or to amalgamate with another company.

A company may be wound up voluntarily under the following circumstances:-3

"(1.) Whenever the period, if any, fixed for the duration of the company by the articles of association expires, or whenever the event, if any, occurs, upon the occurrence of which it is provided by the articles of association that the company is to be dissolved, and the company in general meeting has passed a resolution requiring the company to be wound up voluntarily :

(2.) Whenever the company has passed a special resolution requiring the company to be wound up voluntarily :

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(3.) Whenever the company has passed an extraordinary resolution to the effect that it has been proved to their satisfaction that the company cannot, by reason of its liabilities, continue its business, and that it is advisable to wind up the same."

A voluntary winding-up commences as from the date of the resolution to wind up,5 but it is not a bar to the right of any creditor or shareholder to have the company wound up by the Court if the Court is of opinion that his rights would be prejudiced by a voluntary winding-up. If the Court orders the company to be wound up by the Court, it may provide for the adoption of all or any of the proceedings taken in the course of the voluntary winding-up.8

When a resolution has been passed by a company to wind up

voluntarily, the Court may make an order that the voluntary Chap. XVI. winding-up shall continue subject to the supervision of the supervision

Court.1

A supervision order being an order to continue a voluntary winding-up, does not alter the period of the commencement of the winding-up; and it may prescribe the extent to which the winding-up is to be carried on without consulting the judge. Practically, winding-up under supervision differs from voluntary winding-up chiefly in the greater facilities which it affords for obtaining the assistance of the Court and the greater control over the liquidator, its general effect being to continue the winding-up subject to such restrictions, if any, as the Court may impose;2 and, subject to such restrictions, the liquidators may exercise all their powers without the sanction or intervention of the Court.3

of Court.

The Companies (Winding-up) Act, 1890,* does not apply to a Winding-up voluntary winding-up except in regard to the provisions for making Act, 1890. delinquent directors, officers, and promoters liable, and for the making of a statement as to the position of the liquidation by the liquidator to the registrar of joint stock companies. The Act may, however, be made use of by the Court so as to place restrictions on the liquidator's powers analogous to those which the legislature has now imposed, if the creditors desire it, upon the liquidator in a compulsory winding-up.7

The main object of this Act is to introduce the procedure under the Bankruptcy Act, 1883, into the winding up of English companies, and for this purpose it subjects the liquidation to the control of the Board of Trade, imposes certain duties on the official receivers in bankruptcy, and enables the creditors and contributories to appoint a committee of inspection. It requires the official receiver to make reports to the Court calling attention to any matters which ought to be inquired into with respect to the promotion, formation, or failure of the company, or the conduct of its business.9