Question Tag: Corporate Dissolution

a) Explanation of Liquidation:

• Liquidation may be defined as a legal process by which a company or other body corporate is dissolved. During this process, the activities of the organization are wound up, and its assets are either distributed or converted into cash or other considerations and shared among the members and other persons with legally justified claims against the company.

Modes of Winding Up:

1. Official Liquidation: This occurs in accordance with the provisions of the Bodies Corporate (Official Liquidations) Act 1963 (Act 180).
2. Private Liquidation: This occurs on the strength of a special resolution passed by the company.

(4 marks for explanation, 4 marks for modes = 8 marks)

b) Consequences of Winding Up:

1. Cessation of Business Operations: The company is obliged to cease operations from the commencement of the winding-up process, except as may be required for the beneficial winding up of the company.
2. Striking Off the Register: The company’s name is struck off the register by the Registrar and notified in the Gazette, which is the legal equivalent of the company’s burial.
3. Continuation of Corporate State: Despite the winding-up process, the corporate state of the company, its legal personality, and corporate powers continue until the company is dissolved.
4. Effect on Directors’ Powers: In a private liquidation, the appointment of a liquidator automatically leads to the cessation of all powers and authority of the board of directors, with these powers transferring to the liquidator. The liquidator is deemed to stand in a fiduciary relationship similar to that of a director.

(3 marks each for 4 points = 12 marks)