Winding Up of Unregistered Company
The winding up of unregistered company involves making sure that any parties who are entitled to payments receive them.3 min read
The winding up of unregistered company involves making sure that any parties who are entitled to payments receive them. Unregistered companies are subject to winding up procedures, whether solvent or insolvent, as are registered companies and organizations. For unregistered companies, there are four circumstances when a business would be wound up:
- The company has ceased business and has either dissolved or is beginning the dissolving process to finish up lingering business affairs.
- The company simply cannot pay its debts.
- The courts declare that it is fair and equitable for the company to be wound up.
- Standard winding up provisions apply. These apply to unregistered companies as they do for registered companies, but there are a few exceptions to this rule for unregistered companies.
The winding up process is a tedious one and should not be taken lightly. The person in charge of the liquidation process is called the official receiver. They can exercise their powers when they wind up an unregistered company in the same manner that they would approach the winding up of a registered company.
Their job is to report to the secretary of state on the business conduct of the company and if there have been any criminal offenses that were committed during that time. Company directors can be subject to fines, bans from directorship, and potential imprisonment if their behaviors are found to be unjust during this time. Complete cooperation is important during this period to avoid unnecessary penalties.
What Role Does The Contributories Play?
There is a big difference between how unregistered and registered companies are wound up. The deciding factor is the role the contributories play. Contributories are held liable to contribute to the remaining assets of a registered or unregistered company during the winding up process. This is a mandatory rule due to the Companies Act 1965. Their role is vital to ensure that the proper funds are paid to the parties who are entitled to payments. Shareholders who have not yet fully paid their remaining shares are oftentimes considered contributories. However, company directors can also be labeled as contributories if:
- They have not fulfilled their duties as directors.
- They have broken a statutory provision or have acted in a way that can be labeled as misconduct.
- They have an overdrawn loan account with the company.
Contributories are often required to meet the remaining debts of the company if their remaining assets cannot cover the costs. They will end up paying:
- Any remaining debt of the company
- The overall expenses of the winding up process
- Any sum for adjustment for entitled members of the company
Paying for Remaining Assets
The contributories are responsible for securing the remaining funds for a company that is being wound up that cannot pay what is required. The official receiver will have to contact the authorized contributories to make sure that there are some funds available to pay during this process. Failure to do so during this time can lead to legal action being taken against the company. This is why it is incredibly important for all contributories to cooperate with the official receiver. All options should be considered to come up with the funds that are being requested. If the situation progresses to legal action, it can be more expensive and can complicate the situation further.
The contributories will be categorized by the official receiver based upon the levels of contributions that are required. A notice will then be sent by the official receiver to the contributories that will advise them that they have appeared on the list and are required to pay the remaining funds that the company owes. An invitation to represent themselves as to why they should not appear on the list will be made. This is a chance for a contributory to appeal to the official receiver and should not be taken lightly. Contributories have 21 days to take action or face penalties.
A formal call may be made if the official receiver believes it is necessary to make the contributories pay. If no payments have been made after the official receiver has reached out, he or she will then begin asking the creditors of the unregistered company if there are any funds available to begin legal proceedings.
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