How to legally close up a company that is no longer doing business
Closing a company is usually referred to as dissolution and this can be done through members voluntarily winding up the company. The assets of the company are distributed to the creditors if any and among the members of the company according to their shareholding in the company.
Accordingly, Section 457 of the Companies and Allied Matters Act (CAMA)states that a company can be voluntarily wound up if the company was created to exist for a specific period of time or where the articles of the company states that it may be dissolved based on a specific happening. This would be done where the company at a General Meeting has passed a resolution for its dissolution.
Another reason where a company can be dissolved voluntarily is where the company by a special resolution agrees for the winding up of the company.
In voluntarily winding up a company, it is required by law that the public is notified of the proceedings through the Official Gazzette within fourteen days of passing the resolution of the intention to wind up.
There are two types of voluntary winding up proceedings which is the members voluntarily winding up proceedings and the creditors voluntary winding up proceedings. For the purpose of this topic we would be dealing with the members voluntarily winding up.
A members voluntary winding up proceeding can be done in the below manner;
- A resolution is passed by the company to legally dissolve the company. See section 457 of the CAMA.
- A notice of the resolution passed for the dissolution is required to be sent to the Corporate Affairs Commission (CAC) within 14days of its passing and printed in two daily newspapers or the official gazette. Seesection 458 of the CAMA.
- A declaration of solvency is made by the directors of the company before 5weeks of passing the resolution. See section 462 of the CAMA.
- A liquidator will be appointed for the company for the winding up affairs and the distribution of the company’s assets. Also, the position of the directors shall cease unless the liquidator says other wise. See section 464 of the CAMA.
- Where the procedure lasts more than 12months, the liquidator shall call for a meeting and same shall be published in the Gazette.
- On the conclusion of the winding up of the company, the liquidator shall prepare an account to the CAC stating how the winding up proceedings was conducted and how the assets of the company was distributed and he shall also have a General Meeting with the members of the company on the account.
- If the proceedings is more than a year, the liquidator shall at the end of each year call a meeting stating this acts and conducts. Section 470(2) of the CAMA.
- The Liquidator is also required to keep the books of accounts on his dealings for the company during the Winding Up proceedings. The Liquidator shall prepare and send every member of the company final accounts of the company showing its dealing and distribution of assets during the winding up process and shall call a meeting to explain same. section 470(1) of the CAMA.
- After the meeting the liquidator shall within 28days send the report on the books of accounts and distribution of assets to the CAC. See section 470(4) of the CAMA.
- The liquidator shall apply for a final dissolution order and he shall send same to the CAC. The commission having received the account of the company shall register it and same shall be deemed to be dissolved after 3 months. Section 478(4) of the CAMA.
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