Explain the modes of winding up a company under the Companies Act No. 7 of 2007.
How to lay out the answer. Follow the frame, then write it in your own words.
1 · Open in two lines. Winding up ends a company's life: a liquidator realises the assets, pays the debts and distributes the surplus, and the company is dissolved.
2 · Winding up by the court.
Grounds: special resolution, inability to pay debts, just and equitable.
Petition by the company, a creditor or a shareholder.
3 · Draw the steps. [Diagram: petition → order → liquidator → assets sold → debts paid → surplus → dissolved]
4 · Voluntary winding up. Members' (solvent, declaration of solvency) and creditors' (insolvent, creditors' meeting).
5 · Order of payment. Secured creditors from their security; costs; preferential debts; unsecured pari passu; shareholders.
6 · Effects. Liquidator in control, directors' powers end, actions stayed, share transfers void without court approval.
7 · In Sri Lankan business. A creditor petitions when a company cannot pay; some employee dues are preferential.
8 · Close in one line. Whatever the mode, winding up ends in dissolution.
Scoring tip: A flow diagram of the steps and a clear order of payment earn most of the marks.
