What Kind of Companies can be Wound-up?
Only a limited company, which is formed and registered under the Companies Ordinance, can be wound up. The term “winding-up” (or “wound-up”) bears a similar meaning of “liquidation”. It generally means that all the assets of the company would be realised (sold off and converted to cash) through a legal process in order to repay its debts. Winding-up would bring a company to an end.
Modes of Winding-up
A company may be wound up by the court or voluntarily.
- Voluntary winding-up consists of:
- members’ (shareholders’) voluntary winding-up; and
- creditors’ voluntary winding-up.
- Compulsory winding-up by the High Court of the Hong Kong Special Administrative Region (“the Court”)
Members’ voluntary winding-up occurs when the members, by special resolution (75 per cent), resolve to wind up the company and the directors make a declaration of solvency in accordance with the Companies Ordinance (i.e. the company must be solvent to undertake this procedure). The company should able to pay-off its creditors when wound-up. The liquidator, usually a Certified Public Accountant is appointed by the company in general meeting
On the other hand, when directors of the company do not believe that it will be able to pay-off the debt, the creditor(s) can liquidate the company. Creditors’ voluntary winding-up occurs if the company arranges for a creditors’ meeting to be summoned immediately after a general meeting sanctioning the winding-up of the company. Creditors then have the right to appoint their own liquidator to replace the company’s nominated liquidator.