Summary winding up under the Companies (Jersey) Law 1991

A summary winding up is the procedure used to wind up a solvent Jersey company under the Companies (Jersey) Law 1991 (the Law).

This guide examines the procedure for carrying out a summary winding up.

Steps

The steps necessary to carry out a summary winding up are as follows:

• each director of the company must sign a statement of solvency (the First Statement) which states that, having made full enquiry into the company’s affairs, the director is satisfied that:
  • the company has no assets and no liabilities;
  • the company has assets and no liabilities; or
  • the company has liabilities which it will be able to discharge in full as they fall due;
• within 28 days of the First Statement being signed, the company must pass a special resolution to wind up the company by way of summary winding up, which marks the commencement of the winding up. Under the Law, a special resolution is one which is required to be passed as such and is approved by a majority of two thirds (or such higher majority as may be specified in the company’s articles of association) of members who (being entitled to do so) vote at a meeting for which at least 14 days’ notice has been duly given;
• if the members wish to do so, on or after the commencement of the summary winding up, they may pass a special resolution to appoint a liquidator;
• within 21 days of the date on which the special resolution to wind up the company is passed, a copy of that special resolution (and, if applicable, the special resolution to appoint a liquidator) and the First Statement must be delivered to the registrar of companies who will register the First Statement;
• if the company has no assets and no liabilities, the company will be dissolved upon registration of the First Statement;
• If the company has assets and no liabilities, after the First Statement has been registered the directors or (if appointed) the liquidator must distribute the company’s assets to its members according to their rights or otherwise as provided by the company’s memorandum or articles of association. Subject to approval by special resolution, the Law allows a company to transfer assets to another company, limited liability company or limited liability partnership in exchange for shares or interests in that vehicle;
• if the company has liabilities, after the commencement of the winding up the directors or (if appointed) the liquidator must:
  • discharge the company’s liabilities as they become due;
  • once there are no remaining liabilities or where the directors reasonably believe that the company will be able to pay any remaining liabilities as they fall due, distribute the company’s assets to its members according to their rights or otherwise as provided by the company’s memorandum or articles of association;
• as soon as the company has completed the distribution of its assets, each director or (if appointed) the liquidator must sign a statement (the Second Statement) which states that, having made full enquiry into the company’s affairs, each director or the liquidator is satisfied that the company has no assets and no liabilities and, in the case of a public company, provides an account of their acts and dealings during the conduct of the winding up; and
• a copy of the Second Statement must be delivered to the registrar of companies and, upon registration, the company will be dissolved.

Effect of commencement of summary winding up

Once the winding up has commenced:

• the corporate state and capacity of the company continues until it is dissolved on completion of the winding up;
• the powers of the company may only be exercised for the purposes of realising its assets, discharging its liabilities and distributing its assets; and
• every invoice, order for goods or services or business letter issued by or on behalf of the company or (if applicable) the liquidator must contain a statement that the company is in a summary winding up.

If a liquidator is appointed, the directors cease to be authorised to exercise their powers in respect of the company and those powers may only be exercised by the liquidator.

Appointment of liquidator

The Law does not require a liquidator to be appointed to carry out a summary winding up. However, as mentioned above, if they wish to do so, the members may appoint a liquidator by special resolution on or after the commencement of the summary winding up.

Where the affairs of the company are relatively straight forward, for example, because the company is a holding company with few assets or liabilities, it will typically be the case that the directors will conduct the summary winding up and a liquidator will not be appointed. Where, however, the affairs of the company are more complicated, a liquidator can be appointed.

To be eligible to be appointed as a liquidator, the potential appointee must be a natural person, and if the company is a public company, must, among other things:

• not be a director, the secretary or an employee of the company or one of its subsidiaries or holding companies; and
• be a member of the Institute of Chartered Accountants in England and Wales, the Institute of Chartered Accountants in Scotland, the Association of Chartered Certified Accountants or the Chartered Accountants of Ireland.

An appointment of a person who does not satisfy these criteria is void.

A liquidator is entitled to be paid such remuneration as is agreed between the liquidator and the company prior to the liquidator’s appointment, as is approved by the company in a general meeting or as is approved by the court.

Effect of insolvency

If, after the commencement of a summary winding up, the directors form, or (if appointed) the liquidator forms, the opinion that the company has liabilities that it will be unable to discharge as they fall due, the directors or liquidator must call a meeting of the company’s creditors to be held in Jersey. From the date of the creditors’ meeting, the winding up becomes a creditors’ winding up. For more information about a creditors’ winding up, refer to our guide entitled ‘Liquidating an insolvent Jersey company‘.

If a summary winding up has commenced and the assets of the company are subsequently declared en désastre (ie the company is declared bankrupt by a court), the summary winding up automatically terminates and, if a liquidator was appointed, the liquidator automatically ceases to hold office.

Offences

First and Second Statements

It is an offence for:

• a director to sign and deliver to the registrar of companies a First Statement; or
• a director or liquidator to sign and deliver to the registrar of companies a Second Statement,

without having reasonable grounds for the statement made in it.

A person who commits either offence is liable, upon conviction, to imprisonment for up to two years, a fine or both.

Notification company is being wound up

If an invoice, an order for goods or services or a business letter issued after the commencement of the summary winding up does not contain a statement that the company is in a summary winding up, the company and every officer who is in default is guilty of an offence. A person who commits this offence is liable, upon conviction, to a fine.

Contacts

A full list of contacts specialising in corporate law can be found here.