Dissolution of Company
Dissolution of the company means the termination of the activities of the company. On the termination, the company determines its rights and responsibilities and liabilities and then steps ahead to meet those all.
Professor Gawar Said, “Winding up of a company is the process whereby its life is ended and its property is administered for the benefit of its creditors and members.”
Dissolution of the company is a provision in the Companies Act-1994 to allow the removal of the company from the companies Register if certain conditions are made. A company can only be dissolved if the following conditions apply:
- The company has not traded for three months; this must be a genuine cessation of trade.
- The company has no assets or property or cash at the bank.
- The creditors must be circulated requesting their permission for the company to be dissolved under this protest.
- Creditors are given three months to consider the request to dissolve the company and can reject such request.
- The company cannot have changed its name in this period.
- The company may not have disposed of any property or assets (this may include land and buildings, plant and equipment, debars and other assets).
Company closes the accounts of debtor and creditors and pays the shareholder partially or wholly at the dissolution. By its termination company loses its legal entity.