The winding-up of a company may be either voluntary or compulsory.
A voluntary winding-up may take peace either by a provision of the articles of association, or by a resolution passed by the shareholders in general meeting.
In this case the operation is carried Jut in such a form as may be decided on by the assembly of shareholders.
A compulsory winding-up must be resolved upon by the Court, which occurs-
(a) When the company does not commence business within a year from its incorporation, or suspends business for twelve months.
(3) Whenever the number of its members is reduced to less than seven.
(c) Whenever the company is unable to pay its debts.
(d) When, on a petition presented by interested parties, the Court may think it just and advisable to wind it up.
Procedure of Winding-up.-
On resolving upon the winding-up of a company the Court is to appoint an official liquidator on whom the powers of the directors are devolved, and whose discretionary licence is, therefore, almost unlimited; that he may call up the shareholders to the payment of the sums still due on the amount represented by their shares, collect credits, sell properties, and in any other way realize the assets of the company, paying out, in proportion of such assets, the outstanding debts and other liabilities of the company.
The official liquidator, usually a public accountant, must, of course, be a person wholly independent and outside the influence neither of the company, nor in any way connected with its business.
He is to give sureties for the pecuniary correctness of his proceedings, and is invariably required to pay into the Bank of England, directly on receipt, any money or security of any sort passing through his hands.
In the course of the winding-up operation a liquidator usually consults with the shareholders and the creditors of the company, with the purpose of facilitating his task or proposing a compromise of arrangement between the parties.
When the creditors are all paid, or the capital of the company (if limited) is exhausted, the liquidator is to lay before the Court a complete account, show in the manner in which the operations have been conducted and the property of the company disposed of. The Court, upon exhibition of the said account, pronounces the dissolution of the company.
By the amendment of August, 1907, to the Companies Act, a distinction, already in practical use, was acknowledged as legal: companies being thereby classified as either public-to which all rules above described apply-or private, for the formation whereof a minimum of two members is required, and a maximum of fifty is allowed.
Like a public company, a private company enjoys the advantage of limitation in the liability of its members, and is exempt from a part of the formalities prescribed for the former, but has a restriction imposed on the transfer of its shares, and is not allowed to invite the public for the subscription of its shares and debentures.
Down to 1907 a foreign company, viz. a company established in a foreign country, although acting in the United Kingdom, was subject to no control on the part of the British Government: which gave rise to frequent drawbacks owing especially to the want in such companies of any legal personality under the British law.
Such a state of things was done away with by the above quoted amendment, whereby it was enacted that any foreign company having a place of business in the United Kingdom shall henceforth file with the Registrar of joint stock companies a certified copy of the instrument whereby the company has been constituted abroad, a list of the company's directors, and the name and address of a representative duly authorized to accept on behalf of the company any legal deed or notice required to be served on the company.
Any such company shall moreover conspicuously declare and exhibit the name of the company, the name of the country where it was incorporated, and the qualification of "Limited" in the case of limited liability. It shall then be subject to the provisions of the Companies Acts as regard the control of the Board of Trade over the company's affairs.