Winding up is simply put as the liquidation and dissolution process of any given company in Nigeria. It is a decision that is collectively settled by the company to end the existence of such company, consequently leading to the distribution of the company’s assets for the benefits of the creditors and members of the company. The petition for winding up of a company can also be initiated by the creditors of the company. However, the procedure for voluntary winding up of a company in Nigeria could be carried out in any of these three different modes, which are;
(1) Voluntarily,
(2) By the Order of the Court, or,
(3) Subject to the supervision of the Court. – section 401 of Companies and Allied Matters Act 2004.

For the purpose of this discourse, we shall be focusing on winding up by the Order of the Court .
Following the provisions of section 408 , a company may be wound up by the court if –
The company has by special resolution resolved that the company be wound up by the court;
Default is made in delivering the statutory report to the Commission or in holding the statutory meeting;
(c) The number of members is reduced below two;
(d) The company is unable to pay its debts;
(e) The court is of opinion that it is just and equitable that the company should be wound up.

It can therefore be said that winding up is the formal process of terminating the existence of a company, while liquidation is the distribution of the ailing company’s asset among its creditors and debenture holders. Then, dissolution is the actual stage of termination, where the company ceases to be in existence.

Commencement of winding by the court
To commence the process of winding up, an application made to the Federal High Court for the winding up of a company shall be by a petition presented subject to the provisions of section 410 (1), either by –
(a) The company;
(b) A creditor, including a contingent or prospective creditor of the company;
(c) The official receiver;
(d) A contributory;
(e) A trustee in bankruptcy to, or a personal representative of a creditor or contributory;
(f) The Commission under section 323 of this Decree;
(g) A receiver if authorized by the instrument under which he was appointed; or
(h) By all or any of those parties, together or separately.

According to section 415.(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 shall be deemed to have commenced at the time of the passing of the resolution, and unless the court, on proof of fraud or mistake, thinks fit otherwise to direct, all proceedings taken in the voluntary winding up shall be deemed to have been validly taken.
(2) In any other case, the winding up of a company by the court shall be deemed to commence at the time of the presentation of the petition for the winding up.

Consequence
By the combined provisions of sections 416, 417 and 418; the consequences of a winding up Order is that a copy of the Order shall be forwarded by the company to the Corporate Affairs Commission for it to minute on its records relating to the company. Also, once the Order is made or a provisional liquidator is appointed, no action or proceeding shall be commenced against the company except the court grants leave for that purpose on its own terms . The Order also operates in favour of all the creditors and contributories of the company as though they were part of the petition originally.

LIQUIDATION
Liquidation is the process of bringing a business to an end and distributing its assets to claimants. It is an event that usually occurs when a company is insolvent, meaning it cannot pay its obligations when they are due. Whatever is left as the surplus after paying off the creditors, is then distributed to the shareholders in accordance with the provisions of the memorandum and articles of association.

According to section 422 (1) (among others):
The court may appoint a liquidator or liquidators for the purpose of conducting the proceedings in winding up a company and performing such duties in reference thereto as the court may impose and where there is a vacancy, the official receiver shall by virtue of his office, act as liquidator until such time as the vacancy is filled.

The Supreme Court in OREDOLA OKEYA TRADING CO. & ANOR v. BANK OF CREDIT & COMMERCE INTERNATIONAL & ANOR (2014) LPELR-22011(SC) had to distinguish between liquidation of a company and dissolution of a company as thus:
“Now, winding up of a company involves the liquidation of the company/corporation so that assets are distributed to those entitled to receive them. Campbell Black, says, liquidation is quite distinguishable from dissolution which is the end of the legal existence of a corporation. Liquidation may precede or follow dissolution (p.839 of Black’s Law Dictionary 5th ed.) thus, mere revocation of banking license of a bank, without more, as claimed by the applicant cannot bring to an end the juristic life of a bank or corporation. Likewise, where a bank or corporation ceases to operate or closes its business that does not determine the legal existence of such a bank or corporation.” Per MUHAMMAD, J.S.C. (P. 16, paras. D-G)

DISSOLUTION
Dissolution has multiple meanings. Dissolution is the last stage of liquidation, the process by which a company (or part of a company) is brought to an end, and the assets and property of the company redistributed.
By the provisions of sections 454 .
(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 of guilty of an offence and liable to a fine of ₦25 for every day during which he is in default.

In APC & ORS v. IN RE: CPC & ORS (2014) LPELR-24036(SC), the Supreme Court restated the effect of the dissolution of a legal person thus:
“the dissolution of legal person is analogous to the death of an ordinary human person…. dead men are no longer legal persons in the eye of the law as they have laid down their legal personality with their lives at death. Being destitute of rights or interest they can neither sue nor be sued of” Per MUHAMMAD, J.S.C. (Pp. 33-34, paras. B-C)
While any of the persons stated in section 410(a) may, in their respective circumstances, file a winding-up petition, it is the duty of the liquidator to apply to the Court for a Dissolution Order to dissolve the company at the completion of the winding-up process.

CONCLUSION
From the analysis, it can be said that winding up of a company is usually the last resort for an ailing company which has ceased to be a going concern or virtually neck-deep in debts. With regards to section 422(1) of the Company and Allied Matters Act 2004, it is noteworthy that there are exceptional circumstances where liquidators are already provided for in cases of winding up of companies. For instance, section 40 of the Nigerian Deposit Insurance Corporation makes the commission a deemed liquidator of failed insured institutions.
The idea of penalizing defaulting liquidators in the sum of ₦25 daily is not in line with current realities. Penalties are supposed to be deterrents to other would-be defaulters but in a situation where the amount is extremely insignificant, it would be observed more in its breach than adherence.




Source: https://chrystallaw./2019/08/08/the-effects-of-winding-up-of-a-company-in-nigeria/

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