Winding Up: the Modern Map

In one line

There is now only one winding up under the Companies Act, winding up by the Tribunal on the five grounds in s.271; voluntary winding up has moved out of the Act entirely into the Insolvency and Bankruptcy Code 2016 as voluntary liquidation, and inability to pay debts has moved with it into the corporate insolvency resolution process.

In exam wording: under section 270, as substituted, the provisions of Part I shall apply to the winding up of a company by the Tribunal under this Act.

Why the law is now like this

Until 2016 the Companies Act contained a complete insolvency and liquidation code for companies, and it sat alongside several others. A company in financial distress might be dealt with under the sick companies legislation, under the debt recovery legislation, under the securitisation legislation, or by a winding up petition in the Companies Act. The results were inconsistent, the timelines were long, and no single forum had the whole picture.

The Insolvency and Bankruptcy Code 2016 consolidated that field, and it did so by taking two things out of the Companies Act.

Inability to pay debts. A company that cannot pay is now dealt with by the corporate insolvency resolution process, whose object is to rescue the enterprise if it can be rescued and to liquidate it only if it cannot. That is a different policy from winding up, which begins from the assumption that the company is to be ended.

Voluntary winding up. A solvent company that wishes to close is now dealt with by voluntary liquidation under the Code, treated in [Voluntary Liquidation under the IBC].

What is left in the Companies Act is a residual jurisdiction: winding up by the Tribunal on grounds that have nothing to do with solvency. That is why the modern map is so much simpler than the one in older textbooks, and why the older classification is not merely out of date but positively wrong.

What was omitted, and by what

Every one of the following was omitted by s.255 and the Eleventh Schedule of the Insolvency and Bankruptcy Code 2016 with effect from 15 November 2016, and the omissions are printed in the Act text as read for this book.

The heading "Part II, Voluntary winding up" itself.

The whole of ss.304 to 323, that is: s.304, circumstances in which a company may be wound up voluntarily; s.305, declaration of solvency; s.306, meeting of creditors; s.307, publication of the resolution; s.308, commencement of voluntary winding up; s.309, its effect; s.310, appointment of Company Liquidator; s.311, power to remove and fill a vacancy of Company Liquidator; s.312, notice of his appointment to the Registrar; s.313, cesser of the Board's powers on his appointment; s.314, his powers and duties in a voluntary winding up; s.315, appointment of committees; s.316, his report on progress; s.317, his report to the Tribunal for examination of persons; s.318, final meeting and dissolution; s.319, his power to accept shares as consideration for a sale of the company's property; s.320, distribution of the property of the company; s.321, when an arrangement is binding on the company and its creditors; s.322, power to apply to the Tribunal to have questions determined; and s.323, costs of voluntary winding up. And with them s.325, application of insolvency rules in the winding up of insolvent companies.