What is Winding Up (or liquidation)?
Referring to the Company’s Act Section 212(1), winding up may either be Voluntary, by court or Subject to supervision of the Court. The terms winding up and liquidation are usually used them interchangeably. The two terms are not clearly defined under the Company’s Act.
Basically, liquidation is the process of bringing an end to the existence of a company. It is the process where a company is dissolved and in the course of such dissolution its assets are collected and its debts are paid off out of the assets of the company or from contributions by its members, if necessary. If any surplus is left, it is distributed among the members in accordance with their rights.
Liquidation is the process of withdrawing the management of the company’s affairs from the directors, its assets are realized by the liquidator and its debts are paid out of the proceeds of realization.
The procedure and requirements for a voluntary winding up of a company in Kenya include:
- Special Resolution of the company’s Board
- An up-to-date Company files. You must file all company returns, chattels, debentures and mortgaged settle
- Communicate officially with the Registrar of companies.
- Gazette Notification
- De-registration
Modes of Winding Up or Company Liquidation
There are three (3) modes of winding up a company:-
The first two modes involve the court;
(i) Compulsory winding up by the court
(ii) Winding up of the company under the supervision of the court.
(iii) Lastly, in that list, is a Voluntary winding up:-
This can be categorized further into:
- Members’ voluntary winding up
- Creditors’ voluntary winding up
A receiver is appointed, where a debenture specifically stated that the holder can appoint a receiver, then no
petition in court would be required.
