The sections, word for word
Every section on this subject, exactly as printed in the Official Gazette (Act No. 3 of 2020). The explanation follows beneath.
Section 699. Winding-up of unregistered company
Subject to the provisions of this Part of this Act, an unregistered company may be wound up under this Act and all the provisions of this Act, with respect to winding-up shall apply to an unregistered company, with the following exceptions—
(a) the principal place of business of an unregistered company shall, for all the purposes of the winding-up, be deemed to be the registered office of the company ;
(b) an unregistered company shall not be wound up under this Act voluntarily or subject to supervision ;
(c) an unregistered company may be wound up if—
(i) the company is dissolved, or has ceased to carry on business or is carrying on business only for the purpose of winding-up its affairs,
(ii) the company is unable to pay its debts, or
(iii) the Court is of opinion that it is just and equitable that the company should be wound up ; or
(d) an unregistered company shall, for purposes of this Act, be deemed to be unable to pay its debts if—
(i) a creditor, by assignment or otherwise, to whom the company is indebted in a sum exceeding N100,000 then due, has served on the company, by leaving at its principal place of business, or by delivering to the secretary or some director, manager, or principal officer of the company, or by otherwise serving in such manner as the Court may approve or direct, a demand under his hand requiring the company to pay the sum so due, and the company has for 21 days after the service of the demand neglected to pay the sum, or to secure or compound for it to the satisfaction of the creditor,
(ii) any action or other proceedings has been instituted against any member for any debt or demand due from the company, or from him in his capacity as a member, and notice in writing of the institution of the action or proceeding having been served on the company by leaving it at its principal place of business, or by delivering it to the secretary, or some director, manager, or principal officer of the company, or by otherwise serving the notice in such manner as the court may approve or direct, the company has not within 28 days after service of the notice secured or compounded for the debt or demand or procured the action or proceeding to be stayed, or within that period has not indemnified the defendant to his reasonable satisfaction against the action or proceeding, and against all costs, damages and expenses to be incurred by him by reason of the same, or
(iii) execution or other process issued on a judgment, act or order obtained in any Court in favour of a creditor against the company, or any of its members or any person authorised to be sued as nominal defendant on behalf of the company, is returned unsatisfied and it is otherwise proved to the satisfaction of the Court that the company is unable to pay its debts.
Section 700. Contributories in winding-up unregistered company
(1) In the event of an unregistered company being wound up—
(a) every person is deemed to be a contributory, who is liable to pay or contribute to the payment of—
(i) any debt or liability of the company,
(ii) any sum for the adjustment of the rights of the members among themselves,
(iii) the costs and expenses of winding-up the company, and
(b) every contributory is liable to contribute to the assets of the company all sums due from him in respect of any such liability.
(2) In the event of the death, bankruptcy, or insolvency of any contributory, the provisions of this Act with respect to the personal representatives, heirs, and devisees of deceased contributories, and the trustees of bankrupt or insolvent contributories, as the case may be, shall apply.
Section 701. Power of Court to stay or restrain proceedings
The provisions of this Act with respect to staying and restraining actions and proceedings against a company at any time after the presentation of a petition for winding-up and before the making of a winding-up order shall, in the case of an unregistered company, where the application to stay or restrain is by a creditor, extend to actions and proceedings against any contributory of the company.
Section 702. Action stayed on winding-up order
Where an order has been made for winding-up an unregistered company, no action or proceeding shall be proceeded with or commenced against any contributory of the company in respect of any debt of the company except by leave of the Court, and subject to such terms as the Court may impose.
Section 703. Provisions of this Part to be cumulative
The provisions of this Chapter of this Act with respect to unregistered companies shall be in addition to and not in restriction of any provision under this Act, contained with respect to winding-up companies by the Court, and the Court or liquidator may exercise any power to do any act in the case of unregistered companies which might be exercised or done by it or him in winding-up companies formed and registered under this Act, but an unregistered company shall not, except in the event of its being wound up, be deemed to be a company under this Act, and then only to the extent provided by this Chapter of this Act.
What this means
Short answer
An unregistered company can be wound up under the Act, but only by the court, never voluntarily or under supervision (section 699). It is treated as unable to pay its debts if a creditor owed more than ₦100,000 serves a demand and it neglects it for 21 days, or in two other situations in section 699(d).
What changes for an unregistered company
- Its principal place of business is treated as its registered office for the winding up (section 699(a)).
- It cannot be wound up voluntarily or subject to supervision (section 699(b)).
- It can be wound up if it is dissolved, has ceased to carry on business or carries on business only to wind up its affairs, is unable to pay its debts, or the court considers it just and equitable (section 699(c)).
When it is unable to pay its debts
An unregistered company is deemed unable to pay its debts if (section 699(d)):
- a creditor owed more than ₦100,000 serves a written demand at its principal place of business or on its secretary, director, manager or principal officer, or in a manner the court approves, and the company neglects to pay or secure it to the creditor’s satisfaction for 21 days;
- an action is brought against a member for a debt of the company, or for his debt as a member, and the company does not within 28 days of notice secure the debt, have the action stayed, or indemnify the defendant to his reasonable satisfaction; or
- execution on a judgment in favour of a creditor against the company, a member or a nominal defendant is returned unsatisfied and the court is otherwise satisfied it cannot pay.
Contributories and stays
- Anyone liable to pay or contribute to a debt or liability of the company, to the adjustment of members’ rights, or to the costs of winding up is a contributory and must contribute what he owes. The rules on personal representatives of deceased contributories and trustees of bankrupt ones apply (section 700).
- After a petition and before an order, a creditor’s application to stay or restrain proceedings can extend to actions against any contributory (section 701). After the order, no action can be brought or continued against a contributory for the company’s debt except by leave of the court (section 702).
- These rules add to, and do not restrict, the general winding-up powers of the court and liquidator. An unregistered company is treated as a company under the Act only for winding up and only to the extent this Chapter provides (section 703).
Questions and answers
Can an unregistered company be wound up voluntarily?
No. An unregistered company can be wound up only by the court, not voluntarily or under supervision (section 699(b)).
What is the debt demand threshold for an unregistered company?
A creditor owed more than ₦100,000 who serves a demand that the company neglects for 21 days (section 699(d)(i)).
Where is an unregistered company’s registered office for a winding up?
Its principal place of business is treated as its registered office (section 699(a)).
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