Company law Coursework Example | Topics and Well Written Essays - 1750 words

Company law - Coursework Example Dissolution of a company can be voluntary or through winding up. Voluntary liquidation of a  company  occurs when the shareholders of a company come to a consensus,  pass  a resolution saying that they have agreed to  dissolve  the company. On the other hand, the court may  give  out an  order  for the winding up of a company commonly done at the behest of a creditor who has not been paid.  According to Ahmadu and Robert (425) global trends have led companies to be cautious in the way their operations  are halted. Question 1 Liquidation of any company entails the winding up of financial statements in order to  create  time  for effective dismantling of the structure of the company and  help  in  fairly  distributing the assets of the company to its creditors.  Liquidation provides the only  true  way of ending the activities and operations of a company because both the assets and  financial  structure  are evaluated  (Ahmadu and Rob ert, 471). The court order for compulsory winding up Zed Ltd provides both the company and creditors with transparency and accountability because an independent entity, the liquidator,  is given  the task of protecting the interests of the shareholders, directors, creditors, and members. Since the court has appointed a liquidator, it shows that the creditor had enough  proof  to show that Zed Ltd truly is not able to pay all its debts. In addition, the company has in the recent past had cash flow problems. Therefore, Zed Ltd is insolvent. In the case of Niger Merchants Co. v Copper (1877) 185 ChD 557n, Jessel MR proposed that pursuing a winding-up petition for a solvent company is an abuse of the court’s process (Hicks and Goo, 609). Other such cases include Mann v Goldstein, and the sentiments of Malins VC in Cadiz Waterworks Co. v Barnett (1874) LR 19 Eq 182. Zed Ltd is unable to pay its debts; hence the creditor can apply to the court for a petition for winding-up. Section 123 provides information that can be used to substantiate whether or not a company is unable to pay its debts. The companies act provides provisions that are to be followed during liquidation as asserted by OECD (246). Although Zed Ltd was not aware of the petition filed in court by one of their creditors, the law requires the company not to  accept  any deliveries of goods for which it has not prepared any payment procedures. Also, the company  is supposed  to maintain the current status of its creditors, but it should not improve or  make  worse the situation. Nonetheless, any improvement or worsening of the situation may  lead  the directors to incur personal liability or be liable for misfeasance (Debt UK, 2008). The company has to ensure that no assets fall into the hands of creditors  because  they may be available for set off. Zed Ltd was under pressure to  pay  up its outstanding bills and debts; it sold a spare machine for ?10,000 whose  i nitial  price  was ?9,000. Moreover, the company had donated a minibus to a charity in an  attempt  to promote the company’s image. However, Zed Ltd was not aware of the petition filed against it in court. The sale of the  spare  machine and the issuance of the minibus to  charity  involve  company assets. However, the minibus  was given  to charity on 15 October 2009; creditor cannot  challenge  this  move  because it had taken  place before the petition