Comparison of Liquidation Processes
| Winding Up by the Court | Creditors’ Voluntary Liquidation | Members’ Voluntary Liquidation |
|
|---|---|---|---|
| Purpose: | To allow an insolvent company to be placed in liquidation by order of the High Court to wind up the affairs of the company | To allow an insolvent company to put itself into liquidation and wind up the affairs of the company without the need for a court order | To allow a solvent company to put itself into liquidation and wind up the affairs of the company |
| Proposed/ begun by: | Normally a creditor but can also be a director or shareholder (in certain circumstances) | The shareholders (not creditors) | The shareholders |
| Handled by: | Liquidator | Liquidator | Liquidator |
| Creditors Notified: | Normally by the provisional liquidator following the provisional order but all creditors will be notified in advance of the first meeting of creditors and given 10 days’ notice | Must be given seven days’ notice of meeting of creditors to be held on day or day after meeting of members | No requirements to notify creditors |
| Meeting of creditors and voting rights: | Meeting of creditors held as soon as possible after final order is granted. To vote, creditors must prove a claim. Claims are proven by the Master. Two meetings of creditors are required. | On day or day after the members’ meeting. To vote, creditors must prove a claim. Claims are proven by the liquidator. | There are either no debts due or debts must be paid within 12 months. If the liquidator considers that the company will not be able to pay its debts in full within 12 months, a meeting of creditors must be held and the liquidation becomes a creditors’ voluntary liquidation |
| Remuneration of liquidator fixed by: | Creditors at the first meeting of creditors or in terms of the tariff. Remuneration can be taxed by the Master. | Creditors at the meeting of creditors | Shareholders |
| Completion: | Liquidator required to prepare an account of receipts and payments and plan of distribution. Once the final account is confirmed distribution can be made. The liquidator can then apply for his release from the Master of the High Court after giving notice. The Registrar of Companies will remove the company from the register following release of the liquidator. | Liquidator required to prepare an account of receipts and payments and plan of distribution. The account is confirmed at a meeting of creditors and the liquidator can request release following payment of dividend. The Registrar of Companies will remove the company from the register following release of the liquidator. | Liquidator required to prepare an account of receipts and payments and plan of distribution. The account is confirmed at a meeting of members and the liquidator can request release following payment of dividend. The Registrar of Companies will remove the company from the register following release of the liquidator. |
| Legal action against the company/individual after winding up: | No legal proceedings may be commenced or pursued against a company wound up by the court following the winding up order, without leave of the court. | Legal action may be taken by creditors. Creditors can petition for compulsory winding up |