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 574. Powers of Court on hearing petition
(1) On hearing a winding-up petition, the Court may dismiss it, adjourn the hearing conditionally or unconditionally or make any interim order, or any other order that it deems fit, but the Court shall not refuse to make a winding-up order on the ground only that the assets of the company have been mortgaged to an amount equal to or in excess of those assets, or that the company has no assets.
(2) Unless it appears to the Court that some other remedies are available and that the petitioners are acting unreasonably in seeking a winding-up order instead of pursuing those remedies, the Court, on hearing a petition by contributory members of a company for relief by winding-up on the ground that it would be just and equitable so to do, shall make the order as prayed if it is of the opinion that the petitioners are entitled to the relief sought.
(3) Where a petition is presented on the ground of default in delivering the statutory report to the Commission or in holding the statutory meeting, the Court, instead of making a winding-up order, may direct the delivery of the statutory report or the holding of a meeting, and order the costs to be paid by the persons who, in the opinion of the Court, are responsible for the default.
Section 575. Power to stay or restrain proceedings against company
Where a winding-up petition has been presented and an action or other proceeding against a company is instituted or pending in any Court (in this section referred to as “the Court concerned”), the company or any creditor or contributory may, before the making of the winding-up order, apply to the Court concerned for an order staying proceedings and the Court concerned may, with or without imposing terms, stay or restrain proceedings, or if it deems fit, refer the case to the Court hearing the winding-up petition.
Section 576. Avoidance of dispositions of property after commencement of winding-up
In a winding-up by the Court, any disposition of the property of the company, including things in action and any transfer of shares, or alteration in the status of the members of the company, made after the commencement of the winding-up shall, unless the Court otherwise orders, be void.
Section 577. Avoidance of attachments
Where a company is being wound up by the Court, any attachment, sequestration, distress or execution put in force against the estate or effects of the company after the commencement of the winding-up is void : Provided the provisions of this section do not apply to a fixed charge or any other validly created and perfected security interest other than a floating charge.
Section 578. Commencement of a winding-up by the Court
(1) Where, before the presentation of a petition for the winding-up of a company by the Court, a resolution has been passed by the company for voluntary winding-up, the winding-up of the company is deemed to have commenced at the time of the passing of the resolution, and unless the Court, on proof of fraud or mistake, deems it fit to direct otherwise, all proceedings taken in the voluntary winding-up are deemed to have been validly taken.
(2) In any other case, the winding-up of a company by the court is deemed to commence at the time of the presentation of the petition for the winding-up.
Section 579. Copy of order to be forwarded to Commission
On the making of a winding-up order, a copy of the order shall immediately be forwarded by the company, or otherwise as may be prescribed, to the Commission, which shall make a minute thereof in its books relating to the company.
Section 580. Actions stayed on winding-up order
If a winding-up order is made or a provisional liquidator is appointed, no action or proceeding shall proceed with or commence against the company except by leave of the Court given on such terms as the Court may impose.
Section 581. Effect of winding-up order
An order for winding-up a company shall operate in favour of all the creditors and of all the contributories of the company as if made on the joint petition of a creditor and of a contributory.
Section 601. Power to stay winding-up
(1) The Court may, at any time after an order for winding-up, on the application either of a liquidator, the official receiver or a creditor or contributory and on proof to the satisfaction of the Court that all proceedings in relation to the winding-up ought to be stayed, make an order staying the proceedings either altogether or for a limited time, on such terms and conditions as the Court deems fit.
(2) The Court may, at any time after an order for winding-up, on the application either of the liquidator or a creditor, and after having regard to the wishes of the creditors and contributories, make an order directing that the winding-up, ordered by the Court, shall be conducted as a creditors’ voluntary winding-up, and if the Court does so, the winding-up shall be so conducted.
(3) On any application under this section, the Court may, before making an order, require the official receiver to furnish to the Court a report with respect to any facts or matters which are in his opinion relevant to the application.
(4) A copy of every order made under this section shall immediately be forwarded by the company, or otherwise as may be prescribed, to the Commission which shall make a minute of the order in its books relating to the company.
(5) If default is made in lodging a copy of an order made under this section with the Commission as required by subsection (4), every officer of the company or other person who authorises or permits the default shall be liable to a penalty as may be prescribed by regulation.
Section 602. Settlement of list of contributories and application of assets
(1) As soon as may be after making a winding-up order, the Court shall settle a list of contributories, and may rectify the register of members in all cases where rectification is required in under this Act, and the Court shall cause the assets of the company to be collected, and applied in discharge of its liabilities.
(2) Where it appears to the Court that it will not be necessary to make calls on or adjust the rights of contributories, the Court may dispense with the settlement of a list of contributories.
(3) In settling the list of contributories, the Court shall distinguish between persons who are contributories in their own right and persons who are contributories as being representatives of or liable for the debts of others.
Section 603. Delivery of property to liquidator
The Court may, at any time after making a winding-up order require a contributory for the time being on the list of contributories and any trustee, receiver, banker, agent, or officer of the company to pay, deliver, convey, surrender or transfer immediately, or within such time as the Court directs, to the liquidator, money, property, or books and papers in his hands, to which the company is prima facie entitled.
Section 604. Payments by contributory to company and set-off allowance
(1) The Court may, at any time after making a winding-up order, make an order on any contributory for the time being on the list of contributories to pay, in the manner directed by the order any money due from him or from the estate of the person whom he represents to the company, exclusive of any money payable by him or the estate by virtue of any call under this Act.
(2) The Court making an order under this section in the case of—
(a) an unlimited company, may allow to the contributory by way of set-off any money due to him or to the estate which he represents from the company of any independent dealing or contract with the company, but not any money due to him as a member of the company in respect of any dividend or profit ; and
(b) a limited company, may make to any director or manager whose liability is unlimited or to his estate, the allowances in paragraph ( (3) In the case of any company, limited or unlimited, when all the creditors are paid in full, the money due on any account to a contributory from the company may be allowed to him by way of set-off against any subsequent call.
Section 605. Power of Court to make calls
(1) The Court may, at any time after making a winding-up order and either before or after it has ascertained the sufficiency of the assets of the company, make calls on all or any of the contributories for the time being settled on the list of the contributories to the extent of their liability, for payment of any money which the Court considers necessary to satisfy the debts and liabilities of the company, the costs, charges and expenses of winding-up, the adjustment of the rights of the contributories among themselves, and make an order for payment of the calls made.
(2) In making a call under this section, the Court shall take into consideration the probability that some of the contributories may fail, wholly or partially to pay for the call.
Section 606. Power to order payment into companies’ liquidation account
(1) The Court may order any contributory, purchaser or other person from whom money is due to the company to pay it into the company’s liquidation account referred to in section 591 of this Act to the account of the liquidator instead of directly to the liquidator and the order may be enforced in the same manner as if it had directed payment to the liquidator.
(2) Moneys and securities paid or delivered into the company’s liquidation account in the event of a winding-up by the Court shall be subject in all respects to any relevant order of the Court.
Section 607. Order on contributory to be conclusive evidence
(1) An order made by the Court on a contributory shall, subject to any right of appeal, be conclusive evidence that money, if any thereby appearing to be due or ordered to be paid, is due.
(2) All other pertinent matters stated in the order shall be taken to be truly stated as against all persons and in all proceedings, except proceedings against the land of a deceased contributory, when the order shall be only prima facie evidence for the purpose of charging his land, unless his heirs or devisees were on the list of contributories at the time the order was made.
Section 608. Power to exclude creditors not proving in time
The Court may fix a time or times within which creditors are to prove their debts or claims, or be excluded from the benefit of any distribution made before those debts are proved.
Section 609. Adjustment of rights of contributors
The Court shall adjust the right of the contributories among themselves and distribute any surplus among the persons entitled thereto.
Section 610. Inspection of books by creditors and contributories
(1) The Court may, at any time after making a winding-up order, make such order for inspection of the books and papers of the company by creditors and contributories as the Court deems just, and books and papers in the possession of the company may be inspected by creditors or contributories accordingly, but not further or otherwise.
(2) Nothing in this section shall be taken as excluding or restricting any statutory rights of a government department or person acting under the authority of a government department.
Section 611. Power to order costs of winding-up to be paid out of assets
The Court may, in the event of the assets being insufficient to satisfy the liabilities, make an order as to the payment out of the assets of the costs, charges and expenses incurred in the winding-up in such order of priority as the Court deems just.
Section 612. Power to summon persons suspected of having property of company, etc.
(1) The Court may, at any time after the appointment of a provisional liquidator or the making of a winding-up order, summon before it any officer of the company or person known or suspected to have in his possession any property of the company or supposed to be indebted to the company, or any person who the court deems capable of giving information concerning the promotion, formation, trade, dealings, affairs or property of the company.
(2) The Court may examine on oath any person summoned concerning the matters under subsection (1) either by word of mouth or on written interrogatories, reduce his answers to writing and require him to sign them.
(3) The Court may require any person summoned under subsection (1), to produce books and papers in his custody or power relating to the company but, where the person claims a lien on books or papers produced by him, the production is without prejudice to the lien, and the court shall have jurisdiction in the winding-up to determine all questions relating to that lien.
(4) If a person summoned under subsection (1), after being tendered a reasonable sum for his expenses, refuses to come before the Court at the time appointed, not having lawful impediment (made known to the Court at the time of its sitting and allowed by it), the Court may cause him to be apprehended and brought before the Court for examination.
Section 613. Power to order public examination of promoters, etc.
(1) Where an order is made for winding-up a company by the Court and the official receiver makes a further report under this Act stating that in his opinion a fraud has been committed by a person in the promotion or formation of the company, or by any director or other officer of the company in relation to the company since its formation, the Court may, after consideration of the report, direct that a person who has taken part in the promotion or formation of the company, or has been a director or officer of the company, shall attend before the Court on a day appointed by the court for that purpose, and be publicly examined as to the promotion or formation or the conduct of the business of the company, or as to his conduct and dealing as director or officer thereof.
(2) The official receiver shall take part in the examination, and for that purpose may, if specially authorised by the Commission in that behalf, employ a legal practitioner.
(3) The liquidator, where the official receiver is not the liquidator, and a creditor or contributory, may also take part in the examination, either personally or by a legal practitioner.
(4) The Court may put such questions to the person examined as the Court deems fit.
(5) The person examined shall be examined on oath, and shall answer all such questions as the Court may put or allow to be put to him.
(6) A person ordered to be examined under this section shall, at his own cost, before his examination, be furnished with a copy of the official receiver’s report, and may, at his own cost, employ a legal practitioner who shall be at liberty to put to him such questions as the Court may deem just for the purpose of enabling him to explain or qualify any answers given by him : Provided that the person applies to the Court to be exculpated from charges made or suggested against him, the official receiver shall appear on the hearing of the application and call the attention of the Court to any matters which appear to the official receiver to be relevant, and if the Court after hearing any evidence given or witnesses called by the official receiver, grants the application, the Court may allow the applicant such costs as in its discretion it may deem fit.
(7) Notes of the examination shall be taken down in writing, and shall be read over to or by, and signed by, the person examined and may, thereafter be used in evidence against him and shall be open to the inspection of any creditor or contributory at all reasonable times.
(8) The Court may, if it deems fit, adjourn the examination.
(9) An examination under this section may, if the Court directs, and subject to general rules made under section 616 of this Act, be held before any magistrate, and the powers of the court under this section as to the conduct of the examination but not as to costs, may be exercised by the magistrate before whom the examination is held.
Section 614. Power to arrest absconding contributory
The Court, at any time either before or after making a winding-up order, on proof of probable cause for believing that a contributory is about to quit Nigeria or otherwise abscond, remove or conceal any of his property for the purpose of evading payment of calls, or of avoiding examination with respect to the affairs of the company, may cause the contributory to be arrested, and his books, papers and movable personal property, to be seized, and him and them to be kept safely until the time which the Court may order.
Section 615. Powers of Court cumulative
A power by this Act conferred on the court shall be in addition to and not in restriction of existing powers of instituting proceedings against contributory or debtor of the company, or the estate of a contributory or debtor, for the recovery of any call or other sums.
Section 616. Delegation to liquidator of certain powers of Court
(1) Provision may be made by rules for enabling or requiring all or any of the powers and duties conferred and imposed on the Court by this Act, in respect of the matters following, to be exercised or performed by the liquidator as an officer of the Court, and subject to the control of the Court, that is to say, the powers and duties of the Court in respect of—
(a) holding and conducting of meetings to ascertain the wishes of creditors and contributories ;
(b) settling of lists of contributories and the rectifying of the register of members where required, and the collecting and applying of the assets ;
(c) requiring delivery of property or documents to the liquidator ;
(d) making of calls ; and
(e) fixing of a time within which debts and claims shall be proved.
(2) Nothing in this section shall authorise the liquidator, without the special leave of the Court, to rectify the register of members, or, without either the special leave of the Court or the sanction of the Committee of Inspection, to make any call.
Section 617. Dissolution of company
(1) If the affairs of a company have been fully wound up and the liquidator makes an application in that behalf, the court shall order the dissolution of the company and the company shall be dissolved accordingly from the date of the order.
(2) A copy of the order shall, within 14 days from the date when made, be forwarded by the liquidator to the Commission who shall make in its books a minute of the dissolution of the company.
(3) If the liquidator makes default in complying with the requirements of this section, he shall be liable to a penalty as may be prescribed by the Regulation for every day during which he is in default.
Section 618. Power to enforce orders
An order made by a court under this Act may be enforced in the same manner as orders made in any action pending therein.
Section 619. Appeals from orders
Subject to rules of Court, an appeal from any order or decision made or given in the winding-up of a company by the Court under this Act, shall lie in the same manner and subject to the same conditions as an appeal from any order or decision of the court in cases within its ordinary jurisdiction.
What this means
Short answer
In a winding up by the court, the winding up is deemed to start when the petition is presented (section 578(2)). From then, dispositions of the company’s property are void unless the court orders otherwise (section 576), and once the order is made no action can proceed against the company without the court’s leave (section 580).
At the petition hearing
On hearing a petition, the court can dismiss it, adjourn it, or make an interim or other order. It cannot refuse an order only because the company’s assets are mortgaged for as much as they are worth, or because it has no assets (section 574(1)). Where contributories petition on the just and equitable ground, the court must make the order if it considers the petitioners entitled, unless another remedy is available and they are acting unreasonably in not pursuing it (section 574(2)). Where the ground is failure to deliver the statutory report or hold the statutory meeting, the court can instead direct that it be delivered or held and order the persons responsible to pay costs (section 574(3)). A contributory can petition even if there will be no assets left to distribute to contributories (section 573(4)). The court will not hear a petition by a contingent or prospective creditor until security for costs is given and a prima facie case is made (section 573(2)(c)). For who can petition and on what grounds, see when a company is unable to pay its debts.
Who can petition
Section 573(1) lets a petition be presented by the company or a director; a creditor, including a contingent or prospective creditor; the official receiver; a contributory; a trustee in bankruptcy or personal representative of a creditor or contributory; the Commission under section 366; or a receiver, if the instrument appointing him authorises it. Section 573(2) sets limits. A contributory cannot petition unless, among other conditions, the number of members has fallen below two in a company that had more than one shareholder. A petition based on failure to deliver the statutory report or hold the statutory meeting can be presented only by a shareholder, and not before 14 days after the last day on which the meeting should have been held. Where a company is already being wound up voluntarily or under supervision, the official receiver can also petition, but the court makes no order unless the voluntary winding up cannot continue with due regard to creditors’ or contributories’ interests (section 573(3)).
Before the order is made
Once a petition has been presented, the company, a creditor or a contributory can apply to the court where another action against the company is pending to stay or restrain it, or to refer it to the winding-up court (section 575).
When the winding up starts
If a resolution for voluntary winding up was passed before the petition, the winding up is deemed to have started when that resolution passed, and the proceedings in that voluntary winding up are deemed valid unless the court directs otherwise on proof of fraud or mistake. In any other case it starts when the petition is presented (section 578).
What happens to the company’s property and creditors
- Dispositions. After the winding up starts, any disposition of company property, any transfer of shares and any alteration in the status of members is void unless the court orders otherwise (section 576).
- Attachments. Any attachment, sequestration, distress or execution against the company after commencement is void, but this does not apply to a fixed charge or another validly created and perfected security interest other than a floating charge (section 577).
- Actions. After a winding-up order, or on appointment of a provisional liquidator, no action or proceeding can start or continue against the company except with the court’s leave (section 580).
- Everyone benefits. The order operates in favour of all creditors and contributories as if made on the joint petition of a creditor and a contributory (section 581).
- Notice. A copy of the order is forwarded to the Commission, which records it (section 579).
The court’s powers after the order
The court settles the list of contributories and collects and applies the assets (section 602). It can order contributories, trustees, receivers, bankers, agents or officers to hand over money, property and books to the liquidator (section 603), make calls on contributories (section 605), fix a time for creditors to prove debts (section 608), order the costs of winding up to be paid from the assets (section 611), and summon and examine anyone who may have company property or information (section 612). Where the official receiver reports fraud, it can order public examination of promoters, directors and officers (section 613), and it can order the arrest of a contributory about to abscond (section 614). It can also stay the winding up, or direct that it continue as a creditors’ voluntary winding up (section 601).
Dissolution and appeals
When the company’s affairs are fully wound up and the liquidator applies, the court orders the company dissolved from the date of the order. The liquidator forwards a copy to the Commission within 14 days (section 617). Orders are enforced like other court orders, and appeals lie as in the court’s ordinary jurisdiction (sections 618 and 619).
Questions and answers
When does a winding up by the court start?
When the petition is presented, unless a resolution for voluntary winding up was passed earlier, in which case it is deemed to start at that resolution (section 578).
Can creditors sue a company after a winding-up order?
Not without the court’s leave, on terms it imposes (section 580).
Are the company’s property dealings valid after the winding up starts?
Dispositions of property, share transfers and changes in members’ status are void unless the court orders otherwise (section 576).
How does a winding up by the court end?
When the affairs are fully wound up and the liquidator applies, the court orders dissolution. A copy goes to the Commission within 14 days (section 617).
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