Corporate winding-up

When an individual’s debts grow to such an extent that they cannot ever hope to pay them, that person must go into bankruptcy.

When a company cannot pay its debts it can be put into corporate bankruptcy.   The main difference between the two is that the person lives to fight another day when they come out of bankruptcy, while that luxury may not be afforded to a company which may be wound-up - effectively terminated.

Corporate bankruptcy can involve two separate processes – administration and liquidation.

Administration

Administration is the process that allows all the company’s debts to be frozen so that an administrator can work out a strategy to save the company, if possible.  That strategy must be agreed to by the company’s creditors.

Liquidation

Liquidation is the process that occurs when saving the company is no longer possible and the only alternative is to put the company out of its misery through winding-up.

There are other basis on which a company can be wound-up, including:

• the directors have acted in their own interests or in a manner unjust or unfair to members
• the company’s affairs have been conducted in an oppressive, prejudicial or discriminatory way against a member
• the court believes it is just and equitable to do so.