This memorandum has been prepared for the assistance of our clients in connection with the provisions relevant to voluntary winding up of Companies under the Companies (Guernsey) Law, 2008 (as amended) (the "Companies Law"). It is intended to provide only a summary of the main legal and general principles and it is not intended to be comprehensive in scope. It is strongly recommended that you seek specific legal advice on such matters and we would be pleased to assist in this respect. A series of briefings on other specific aspects of Guernsey companies has been produced by Ogier and is available on our website www.ogier.com. Transitional provisions have also been made (a separate briefing addresses the operation of these).
The memorandum has been prepared on the basis of the law and practice in Guernsey as at 1 April 2010.
The Companies Law came into full force on 1 July 2008 and contains provisions in relation to the nature, type, establishment and conduct of Guernsey incorporated companies ("Companies" or "Company" as the context requires), including limited liability companies, companies limited by guarantee, protected cell companies ("PCCs"), protected cells ("PCells") incorporated cell companies ("ICCs"), incorporated cells ("ICells"), unlimited liability companies and mixed liability companies.
The Companies Law also contains provisions for winding up a Company. Winding up is the process by which the affairs of the Company are brought to an end, its assets realised, its liabilities determined and any available funds distributed to those legally entitled to them subject to the general law concerning preferences and preferential payments. Under the Companies Law winding up of a Company may be voluntary or compulsory.
What is Voluntary Winding Up?
A Company may be wound up voluntarily: (1) in either of the following cases: (i) the period (if any) fixed by its articles of incorporation ("Articles") for the duration of the Company expires, (ii) or if an event occurs on the occurrence of which the Articles provide that the Company shall be dissolved, provided that in each case the Company resolves in general meeting that it be wound up voluntarily; or (2) if it passes a special resolution to that effect.
A copy of every resolution (ordinary or special) that a Company be voluntarily wound up must be delivered by the Company to the Registrar of Companies (the "Registrar") within 30 days after the day of it being passed. It is always the case that every special resolution of a Company must be filed with the Registrar within 30 days but in the case of a winding up resolution an ordinary resolution must also be filed within 30 days. The Registrar will give notice of the fact that the Company has passed such resolution in such manner and for such period as he thinks fit.
A voluntary winding up commences upon the passing of the resolution for voluntary winding up.
What happens after a company commences a Voluntary Winding Up?
Once a voluntary winding up has started the Company or cell should cease to carry on business except as far as may be expedient for the beneficial winding up of the Company. The Company appoints a liquidator by ordinary resolution to wind up the Company's affairs, to fix his remuneration and realise and distribute its assets and, having done so, distribute any surplus amongst the members according to their respective entitlements. Upon the appointment of the liquidator the powers of the directors cease unless the liquidator or the Company in general meeting sanctions their continuance. If for any reason no liquidator is appointed as set out above, an application may be made by any member or creditor for a liquidator to be appointed by the Royal Court.
The Companies Law contains provisions requiring the filing of accounts by the liquidator at general meetings on the expiration of each year after the commencement of the voluntary winding up and the holding of a final meeting to approve the liquidator's final accounts prior to the dissolution of the company. Notice of the holding of the final meeting must be lodged at the Companies Registry, and the Company is deemed to be dissolved three months after the date that the liquidator gives notice to the Registrar that the final meeting has been held and the date on which it was held.
Under the Companies Law, the Company may, by special resolution, delegate certain powers to its creditors, or a committee thereof, relating to the winding up subject to certain rights of appeal. A member of a Company which is being voluntarily wound up may apply to the Royal Court for directions in respect of any aspect of the winding up and upon such order the Royal Court can make such order as it deems fit.
The Royal Court may, notwithstanding the passing of a resolution for the voluntary winding up of a Company, entertain an application for the compulsory winding up by the Company, by any director, member or creditor thereof or by any other interested party.
The Companies Law also provides for compulsory winding up of companies (for further information in relation to this topic please refer to our Client Briefing entitled "Compulsory Winding Up of Companies"), administration orders in relation to companies (including for the avoidance of doubt, PCCs and ICCs), PCells and ICells and receivership orders in respect of PCells.
Variation of the Rules for PCCs
PCCs are subject to modified liquidation procedures (as compared to companies, ICCs and ICells) Broadly this means that, notwithstanding any statutory provision or rule of law to the contrary, in the liquidation of a PCC the liquidator:
- is bound to deal with the PCC's assets in accordance with the requirement to keep cellular assets separate and separately identifiable from non-cellular assets and to keep cellular assets attributable to each cell separate and separately identifiable from cellular assets attributable to other cells; and
- in discharge of the claims of creditors of the PCC, shall apply the PCC's assets to those entitled to have recourse thereto in conformity with the relevant provisions of the Companies Law relating to PCCs and PCells.
There are also a number of special provisions in relation to the assets and liabilities of the PCells and the PCC and the manner in which these are to be dealt with (see the Ogier Client Briefing on PCCs).
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.