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The resolution has to be advertised in the Gazette within 14 days and filed with the Registrar of Companies within 15 days of its adoption.
The company can carry on its business only in so far as is necessary to benefit the liquidation.
In practice a liquidator might continue the business for a short period either in a limited way for the beneficial disposal of assets, or to facilitate the sale of the company’s undertaking as a going concern.
A consequence of the liquidation is that the powers of the directors cease other than as sanctioned by the members or the liquidator.
An essential requirement for a members’ voluntary liquidation is that the directors (or a majority of them) must make a statutory declaration that they have made a full inquiry into the company’s affairs and have formed the opinion that the company will be able to pay its debts in full, together with statutory interest, within a specified period, not exceeding 12 months, from the commencement of the liquidation.
The declaration, incorporating a statement of the company’s assets and liabilities at the latest practicable date, is made before a solicitor or commissioner of oaths.
The declaration must be made not more than five weeks before the liquidation and to be effective must also be filed with the Registrar of Companies within 15 days of the commencement of the liquidation.
A director making a declaration has to have reasonable grounds for the opinion that the company will be able to pay its debts in full, together with statutory interest, in the period specified.
The catalyst for a members’ voluntary liquidation is a decision by the directors that the company has no further purpose and that available assets should be realised and distributed to shareholders.
The decision may be prompted by tax planning considerations within groups of companies or as part of group or company reorganisations or reconstruction’s.
A special resolution proposed in general meeting can only be passed if three quarters of the members entitled to vote and voting in person or by proxy vote in favour if it, subject to any poll based on shares held which may be provided for in the company’s articles.
In certain circumstances, for private companies, valid resolutions can be passed without a meeting being held, if the resolution is signed by or on behalf of all members entitled to attend and vote at a general meeting.
If a declaration is made but the company’s debts are neither paid nor capable of being paid in the period, the onus of proof lies on the director to show that he had reasonable grounds for his opinion and, if he does not, he may be liable to imprisonment or a fine.