Circumstances in which a company may be wound up voluntarily.
According to article 261, Part III of the Companies Law (Cap.113) (hereinafter referred to as the "Law"), a company may be wound up voluntarily in the following cases:
- when the period for the duration of the company (if any), which is fixed by the Company's Articles of Association, expires, or the event (if any), on the occurrence of which the company's Articles of Association provide that the company is to be dissolved occurs, and the company has passed a resolution in a general meeting requiring the company to be wound up voluntarily;
- where the company resolves, by special resolution, that it shall be wound up voluntarily;
- where the company resolves, by extraordinary resolution, that it cannot by reason of its liabilities, continue the operation of its business, and that it is advisable to be wound up.
The voluntary winding up of a company shall be deemed to commence at the time of the passing of the resolution for the voluntary winding up thereof (article 263 of the Law). It is noted that in cases where a company has passed a resolution for voluntary winding up, it shall, within fifteen (15) days as of the date of the approval of the aforesaid resolution, proceed with the filing of a copy thereof with the Department of the Registrar of Companies (hereinafter referred to as the "Registrar"), in order for the Registrar to proceed with the relevant publication thereof in the Official Gazette of the Republic of Cyprus (article 262(1) of the Law).
Consequences of Voluntary Winding Up
In case of a voluntary winding up, the company shall, as of the date of commencement of the winding up, cease to carry on its business activities, except where this may be required for the beneficial winding up thereof. Notwithstanding anything to the contrary contained in the company's Articles of Association, the corporate state and corporate powers of the company shall continue until the company is dissolved (article 264 of the Law).
Furthermore, any transfer of shares, not being a transfer made to the liquidator or with the approval of the liquidator, and any alteration in the status of the members of the company, made after the commencement of the company's voluntary winding up, shall be void (article 265 of the Law).
In addition to the aforementioned, it shall be noted that as of the date of the appointment of a liquidator all the powers of the directors shall cease, except where the liquidator or the company in general meeting approves the continuation thereof (article 268(2) of the Law).
Powers of the Liquidator
The liquidator's powers include, inter alia, the following:
- taking into his custody or control all the assets, property, effects and actionable claims of the company;
- verifying claims of all the creditors and consolidate them;
- evaluating the assets and property of the company and prepare a relevant report;
- taking such measures to protect and preserve the assets and property of the company;
- selling the immovable and movable property and actionable claims of the company by public auction or private contract, with power to transfer such property to any person or corporate body, or to sell the same in parcels;
- drawing, accepting, making and endorsing any negotiable instruments on behalf of the company, with the same effect as if such instruments were drawn, accepted, made or endorsed by or on behalf of the company in the ordinary course of its business;
- the investigation of the financial affairs of the company in order to determine undervalued or preferential transactions;
- the signing, execution and verification of any paper, deed, receipt document, application, petition, affidavit, bond or instrument, and for such purpose to use the common seal of the company, if any, as may be necessary for the purposes of liquidation and distribution of the assets of the company;
- to initiate or defend any suit, prosecution or other legal proceedings, civil or criminal, in the name of on behalf of the company;
- to apply to the Court for such orders or directions as may be necessary, regarding the liquidation process;
- to obtain any professional assistance, in the discharge of his/her duties, obligations and responsibilities;
- to invite and settle claims of creditors and claimants and distribute the proceeds in accordance with the provisions of the Law.
Completion of Voluntary Winding Up
As soon as the affairs of the company are fully wound up, the liquidator shall prepare an account in relation to the company's winding up, indicating how the winding up has been conducted as well the manner in which the property of the company has been distributed, and thereupon, the liquidator shall convene a general meeting of the company for the purpose of presenting before the same the aforesaid account, and provide explanations in relation to it.
The meeting shall be convened by publication in the Official Gazette of the Republic of Cyprus, specifying the time, place and object thereof. The notice of the said meeting shall be published in the Official gazette of the Republic at least one (1) month prior to the date of the meeting.
Within one week as of the date of the meeting, the liquidator shall deliver to the Registrar a copy of the account, and files with the Registrar a report regarding the convocation of the meeting and the date thereof. In the event that the copy of the account is not delivered to the Registrar, or the report is not filed with the Registrar, the liquidator is subject to a fine. It is noted that in the event that a quorum is not present at the meeting, the liquidator shall, in lieu of the return mentioned hereinbefore, prepare a return stating that the meeting was duly summoned, and that no quorum was present thereat.
As soon as the Registrar receives the account as well as the relevant report, shall proceed with the registration thereof, and upon the expiration of three (3) months as of the date of their registration, the company shall be deemed to be dissolved.
It shall be stressed at this point that the Court may, on the application of the liquidator or of any other person who appears to the Court to be interested, make an order deferring the date at which the dissolution of the company is to take effect for such time as the Court thinks proper (article 273 of the Law).
In a winding up the following debts shall be paid in priority to all other debts-
1) the below rates and taxes:-
- all local rates owed by the company on the date of passing of the resolution for the company's winding up, which become due and payable within twelve (12) months prior to the aforesaid date;
- all Government taxes and duties owed by the company on the date of passing of the resolution for the company's winding up, that become due and payable within twelve (12) months prior to the aforesaid date. In the case of assessed taxes, these shall not exceed the whole one year's assessment.
2) i. any salary owed to an employee and any sum withheld by the employer from the employee's salary for the payment of any obligations of the employee or otherwise, which has not been paid by the employer; and
- any other sum or benefit of the employee that arises as a result of an agreement or employment relationship, including any sum owed to a recognized union that arises from the employment relationship between the employer and the employee or otherwise, that the employer has not paid. It is noted that this shall not apply in cases where an employee of a private company is a shareholder or member of the company's board of directors, unless he/she holds shares or participates in the board of directors as a representative in an evidently procedural and non-substantive manner, and provided that there is no first or second degree relationship between himself/herself and the person being represented.
- every amount of compensation which the company is obliged to pay to an employee, on account of bodily harm suffered by the employee as a result of an accident caused by his/her employment and during his/her employment with the company. An employee of a private company who is a shareholder thereof is exempted, unless the company is voluntarily wound-up or wound-up for reconstruction or merger purposes.
- every amount due to the employee, excluding an employee of a private company who is a shareholder thereof, concerning the leave which he/she is entitled to from his/her employment in the company for an employment period of only one year.
- In cases where any payment has been made: (a) to any clerk, servant, workman or labourer in the employment of a company, on account of wages or salary; or (b) to any such clerk, servant, workman or labourer or, in case of his/her death, to any other person in his/her right, on account of accrued holiday remuneration, out of money advanced by some person for that purpose, the person by whom the money was advanced shall, in case of the company's winding up, have a right of priority in respect of the money so advanced and paid up to the amount by which the sum in respect of which the clerk, servant, workman or labourer, or other person in his right, would have been entitled to in the event of the company's winding up, to the extent this amount has been diminished by reason of the payment(s) having been made.
The foregoing debts shall rank equally among themselves and be paid in full, unless the company's assets are insufficient to meet these debts, in which case they shall abate in equal proportions. If the assets of the company available for payment of the general creditors are insufficient for the full payment of the general creditors, they shall have priority over the claims of holders of debentures under any floating charge created by the company and be paid accordingly out of any property comprised in or subject to that charge.
Subject to the retention of such sums as may be necessary for covering the costs and expenses of the company's winding up, the foregoing debts shall be discharged to the extent to which the assets of the company are sufficient to meet aforesaid debts (article 300 of the Law).
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.