An overview of winding-up procedures
Winding-up procedures (except "voluntary winding-up"):
Issuing a written demand for debt repayment to the target company
Presenting a winding-up petition to the Court and the company (Note)
Court hearing for the petition
Granting of winding-up order by the Court
Meeting of creditors and other relevant parties
Appointment of liquidator
Realization and distribution of company’s assets to the creditors
Release of duties for liquidator
Dissolution of the company
Note: The winding-up proceedings should be deemed to commence at the time of presenting the winding-up petition to the Court.
Voluntary winding-up by the company itself
No matter whether the company is in financial difficulty or not, it may hold a general meeting of its shareholders to bring itself to an end by winding-up procedures. If a special resolution is passed for winding-up, the company may then apply to the Court for a winding-up order (via procedures similar to a creditor's petition).
Alternatively, a special resolution that the company be wound up voluntarily may be passed. In that case, no winding-up order from the Court is necessary.
What are the effects of voluntary winding-up?
Upon the commencement of the voluntary winding-up, the company will cease to carry on business except that which may be required for the benefit of winding- up smoothly. The legal status and powers of the company will continue until it is dissolved.
Furthermore, any transfer of shares (except a transfer made by the liquidator or made with his/her approval), and any alteration to the status of the members of the company which is made after the commencement of a voluntary winding-up, will be void.
How to wind up a company and bring a business to an end?
The relevant procedures include:-
- A special resolution for voluntary winding-up to be passed by the shareholders.
- A notice of the resolution has to be advertised in the Government Gazette within 14 days of the passing of the resolution.
- The company has to call a meeting of creditors. The notice for the meeting has to be advertised in the Government Gazette and in Chinese and English newspapers.
- The directors of the company have to make a full statement of the position of the company’s affairs, together with a list of creditors and the estimated amount of their claims, to be laid before the meeting. Resolution (concerning the details of the winding-up matter or process) may be passed at the meeting.
- During the meeting, a liquidator may be nominated. Further, an inspection committee may be appointed to supervise the exercise of power by the liquidator. The liquidator will deal with the affairs of the company. The liquidator will call further meetings of the company or creditors each year to account for his acts concerning the winding-up.
- When the affairs of the company have been fully wound up, the liquidator will produce an account of the winding-up, and call a final meeting of the company and of the company’s creditors.
If no special resolution can be passed at a general meeting of shareholders, the board of directors may nevertheless pass a resolution that the company be wound up because the company cannot by reason of its liabilities continues its business. A declaration recording such resolution has to be signed by the directors and be delivered to the Registrar of Companies. Meetings of the company and of the creditors have to be summoned within 28 days of the delivery of such resolution to the Registrar of Companies. A provisional liquidator also has to be appointed upon the delivery.
Due to the complexity of the above procedures, you are advised to consult a lawyer or other qualified professionals before commencing such actions.