PART VI. Winding-up and Dissolution. Statutes, Rules, and Procedure. Winding-up by the Court. Voluntary Winding-up. Winding-up under Supervision. Statutes, Rules, and Procedure. WINDING-UP " means a procedure in the first place for collecting Part VI. and realising the assets of the company and applying them to the discharge of its liabilities, and in the second place for adjusting the rights of shareholders among themselves": Extended Wakatu &c., 13 N.Z. 544, per Richmond, J. The provisions of the Act of 1903 and Rules relating to Statute and Winding-up are as follow:— Statute. The Companies Act, 1903, Secs. 177 to 267, and (as to companies incorporated outside New Zealand) Secs. 310 to 321. See also Sec. 5 as to illegal associations, and Secs. 66 to 68 as to liability of members on their shares. Rules. The rules in force as to winding-up are made under the provisions of Sec. 231 of The Companies Act, 1882, and under The Supreme Court Act, 1882, and are not affected by the repeal of The Companies Act, 1882. They are published in the N.Z. Gazette of 8th December, 1887, No. 76, p. 1492. Modes of Winding-up. A company may be wound-up in three ways 1. By the Court, compulsorily, on the petition (2) Of a contributory or contributories; (3) Of the company itself, or of all or any of them separately or together; see Sec. 179 of 1903. rules. Three modes of winding-up Part VI. Court having jurisdiction. Statute, Rules, and Procedure. 2. Voluntarily, on the passing of an effective resolution by the company authorising such winding-up in any of the events stated in Sec. 220 of the Act of 1903. 3. Voluntarily, but subject to the supervision of the Court, on an order of the Court that the voluntary winding-up shall continue (but subject to supervision); see Sec. 235 of 1903. Where a resolution has been passed for voluntary winding-up the Court is reluctant to order compulsory winding-up, but will, if sufficient grounds be shown, make an order that the voluntary winding-up be subject to supervision; see infra. Winding-up by the Court. The Court Having Jurisdiction. The Court having jurisdiction to wind-up companies under The Companies Act, 1903, is the Supreme Court of New Zealand (see Secs. 2 and 177 of 1903), but the Supreme Court may, after making an order for winding-up a company, direct all subsequent proceedings to be had in the District Court (Secs. 217 to 219 of 1903). Companies which the Court has Jurisdiction to Wind-up. 2. Companies registered in accordance with the provisions of 3. Any company incorporated outside New Zealand carrying on business in New Zealand; see Secs. 297 and 310 of 1903. 4. Companies registered whether or not formed under the repealed Joint Stock Companies Acts; see Secs. 268 and 269 of 1903. By The Building Societies Act of 1880, building societies are to be wound-up by the District Court if the chief office or place of meeting of the society is within a District Court district, if not, then by the Supreme Court. The S.C. Rules of 1887 are (by Order-in-Council published in N.Z. Gazette for 1890, p. 1181) to apply to the winding-up of building societies by the District Court. Winding-up by the Court-Grounds of Petition. Grounds of Petition for Compulsory Winding-up Order. By Sec. 177 of 1903 a company may be wound-up whenever (b) The company does not commence its business within a (c) The members are reduced in number to less than seven. (e) The Court is of opinion that it is just and equitable By Sec. 233 of 1903 the voluntary winding-up of a company shall not be a bar to the right of any creditor or contributory of such company to have the same wound-up by the Court if the Court is of opinion that the rights of such creditor or contributory will be prejudiced by a voluntary winding-up. As to the operation of this section on shareholder's petition, see p. 294 infra. Sub-sec. (a) of Sec. 177. Resolution for Compulsory Winding-up. Part VI. Grounds of petition. In view of the power of voluntary liquidation, proceedings Resolution. under this sub-sec. are infrequent. Sub-sec. (b) of Sec. 177. Non-commencement or Suspension of Business. or suspension of business. Although there may be a suspension of the business of a Non-comcompany for the space of a whole year, the Court will not make mencement an order to wind-up the company unless it is satisfied that there has been an intention on the part of the company to abandon its business, or inability to carry it on; and upon the question of such intention the Court will have regard to the opinion and wishes of the majority of the shareholders whose names are on the register: Tomlin Patent Horse Shoe Co., 55 L.T. 314. Orders were refused in Middlesborough Assembly Rooms Co., 14 C.D. 104; The Metropolitan Railway Warehousing Co., 36 L.J., Ch. 827; Capital Fire Insurance Association, 21 C.D. 209. Orders were made in Patent Steam Engine Co., 8 C.D. 464; Tumacacori Mining Co., 17 Eq. 534. Sub-sec. (c) of Sec. 177. Fewer than Seven Members. See Sec. 132 of 1903 as to liability of members of a company Fewer than carrying on with fewer than seven members. seven members. Part VI. Inability to pay its debts. Petitioner's £50. Winding-up by the Court-Grounds of Petition. All doubts as to the conclusiveness of a certificate of incorporation, where there are fewer than seven incorporating members, are now removed by Sec. 26 (4) of 1903. Sub-sec. (d) of Sec. 177. Company Unable to Pay its Debts. By Sec. 178 of 1903 a company shall be deemed to be unable to pay its debts : (a) Whenever a creditor, by assignment or otherwise, to whom the company is indebted at law or in equity in a sum exceeding fifty pounds then due, has served on the company, by leaving the same at its registered office, a demand under his hand requiring the company to pay the sum so due, and the company has for the space of three weeks succeeding the service of such demand failed to pay such sum, or to secure or compound for the same to the reasonable satisfaction of the creditor. (b) Whenever execution or other process issued on a judgment, decree or order obtained in any Court in favour of any creditor in any proceedings instituted by such creditor against the company is returned unsatisfied in whole or in part. (c) Whenever it is proved to the satisfaction of the Court that the company is unable to pay its debts. Although the minimum of a "sum exceeding £50" is fixed debt less than only by Sub-sec. (a) of Sec. 178, and there is no minimum fixed by Sec. 179, the Court in England has, on the corresponding sections of the E. Act of 1862, declined to entertain a petition based on a debt of less than £50 where the ground of the petition was the company's inability to pay its debts: Milford Docks Co., 23 C.D. 292, 295; Herbert Standring & Co., 1895, W.N. 99; Fancy Dress Balls Co., 1899, W.N. 109. Where debt contested. Statutory demand. Where the alleged debt is bona fide contested, and there is no evidence other than non-compliance with the statutory notice to show that the company is insolvent, and the company denies its insolvency the petition will be dismissed: London and Paris Banking Co., 19 Eq. 444, and cases therein cited. A petition as a means of enforcing payment of a disputed claim is an abuse of the process of the Court, and may be restrained: Ib.; Re a Company, 1894, 2 Ch. 349; Gold Hill Mines, 23 C.D. 210. If the creditor relies on Sub-sec. (a) of Sec. 178 he must prove the service of the statutory notice, and that the three weeks succeeding the service of the demand expired before the presentation of the petition: Catholic Publishing Co., 33 L.J. Ch. 325. But Sub-sec. (c) includes the other two sub-sections, and no demand need be made under Sub-sec. (a) if the company's inability to pay its debts be proved to the satisfaction of the Winding-up by the Court-Grounds of Petition. Court Globe New Patent Co., 20 Eq. 337. In that case dis- Part VI. honour of a bill was held proof that the company was unable to pay its debts. Nor is any demand necessary under Sub-sec. (b). Where the judgment creditor is told by the company that Evidence of inability. they have no assets on which he can levy, that is evidence of its inability to pay its debts so as to relieve the judgment creditor from the necessity of actually levying: Flagstaff &c. Co. of Utah, 20 Eq. 268; Yate Collieries &c. Co., 1883, W.N. 171. Sub-sec. (e) of Sec. 177. clause. It was formerly considered that, although this sub-section "Just and was worded so as to include all cases not before mentioned, it equitable" could not be interpreted otherwise than in reference to matters ejusdem generis as those in the previous sub-sections (see Buckley, 8th ed., p. 255), but it has been laid down by Vaughan Williams, J., in re Sailing Ship Kentmere Co., 1897, W.N. 58, that the doctrine of ejusdem generis may now be disregarded in construing Sub-sec. (e), and a complete deadlock as to the management of the company's affairs is now a sufficient ground. for making a winding-up order. Where it was shown that it was impossible that the business of the company could be carried on with any reasonable hope of success, it was held, under the circumstances, that a winding-up order ought to be made: Bristol Joint Stock Bank, 44 C.D. 703; and similarly where insolvency was inevitable at an early date: Australian Joint Stock Bank, 1897, W.N. 48. But the mere fact that the company is a losing concern does not necessarily make it just and equitable that it should be wound-up: Suburban Hotel Co., 2 Ch. 737; nor the fact that the company is mismanaged and carried on imprudently and unprofitably: European Life Assurance Co., 9 Eq. 122; and see the judgment in this case as to tests of insolvency. Where it has become impossible to carry on or accomplish the primary and essential objects for which the company was formed, or, in other words (to use an expression which has been adopted by the Courts), when the substratum of the company is gone, it will be wound-up compulsorily: Haven Gold Mining Co., 20 C.D. 151; German Date Coffee Co., 20 C.D. 169; Red Rock Mining Co., 61 L.T. 785; Crown Bank, 44 C.D. 634; Coolgardie &c. Mines, 76 L.T. 269; Amalgamated Syndicate, 1897, 2 Ch. 600; but see Langham Skating Rink Co., 5 C.D. 669, and The McDonald Gold Mines, 14 T.L.R. 204. |