Winding Up
Winding up is the process of dissolving a business by selling off its assets and satisfying the creditors from the proceeds of the sale. A company may wind up for different reasons amongst which are insolvency, upon satisfaction of its objects under the Memorandum, but whatever the reasons, legal procedures need to be undertaken to minimize the risk to your personal assets, estate, and credit. Here are some considerations you would need to pay attention to to shut your business down legally.
Modes of Winding Up
You may liquidate your company and use the company assets to pay off its debts, any money left goes to shareholders.
- Voluntary winding up which can either be;
1. Member’s voluntary liquidation – this is for a solvent company (can pay its debts) initiated by the company members.
2. Creditors’ voluntary liquidation – this is for an insolvent company (can’t pay its debts) initiated by members of the company after meeting the creditors of the company. - Liquidation of a company with the supervision of court.
- Compulsory Liquidation – Liquidation by court.
- Evidence of payments
Note; All Financial Institutions are governed by the Central Bank- Bank of Uganda and initiation of voluntary winding up should be by the approval of the Central Bank.. See provisions of the Financial Institutions Act, 2004; Sections 97 and 98.
Completion Of Liquidation
The Liquidation of a company shall be complete when the liquidator delivers to the official receiver a final report and final accounts of the liquidation and a statement indicating that;
1. All known assets have been disclaimed, realized or distributed;
2. All proceeds of realization have been distributed; and
3. In the opinion of the liquidator, the company should be removed from the register.
On delivering to the official receiver the documents above, the liquidator ceases to hold office.
What The Liquidator Does
The fundamental duties of a liquidator under Section 99 of the Insolvency Act are to take in a reasonable and expeditious manner, all steps necessary to;
1. Collect;
2. Realize as advantageously as reasonably possible; and
3. Distribute
The assets or the proceeds of the assets of the company.
The liquidator,
- Gives notice of his appointment in the gazette and newspaper of wide circulation in Uganda. Form 12 Insolvency Regulations
- Files a statement of affairs of the company. Form 20 Insolvency Regulations.
- Files reports in relation to the liquidation process and gives public notice of availability of the reports in a newspaper of wide circulation and delivers copies to the Official Receiver. See reports.
- Sells and distributes the assets or the proceeds of the assets of the company to the creditors.
- Registers his or her interest in all land and other assets belonging to the company.
- Keeps company money separate from other money held by or under the control of the liquidator.
- Keeps full accounts and other records of all transactions relating to the liquidation.
- Retains the accounts and records of the liquidation and of the company for not less than six years after the liquidation ends.
- Permits those accounts and records and the accounts and records of the company, to be inspected.
- Holds meetings with the members of the company.
- Settles legal disputes or outstanding contracts.
- Gets the company struck off from the register.
REPORTS AND NOTICES BY THE LIQUIDATOR.
What the reports entail.
Liquidator’s preliminary report.
1. the state of the company’s affairs,
2. proposals for conducting the liquidation
3. the estimated date of its completion
4.the right of any creditor or shareholder to require the liquidator to call a creditors’ meeting
Liquidator’s interim reports
1. The conduct of the liquidation during the preceding six months period.
2. The liquidator’s further proposals for the completion of the liquidation.
Liquidator’s final report
1. The liquidator shall prepare an account of the liquidation showing how the liquidation was conducted and how the property of the company was disposed of.
2. Final accounts and statement.
The grounds on which a creditor or shareholder may object to the removal of the company from the register under the Companies Act.
Effects Of Liquidation
1. A company shall from the commencement of voluntary liquidation, cease to carry on business, except so far as may be required for the beneficial liquidation of the company.
2. Subject to the above provision, the corporate status and powers of the company shall, notwithstanding anything contrary in its articles, continue until dissolved.
3. Any transfers of shares, not being a transfer made to or with the sanction of the liquidator and any alteration in the status of the members of the company, made after the commencement of the voluntary liquidation is void.
What happens to the Director?
When a liquidator is appointed, the directors;
1. No longer control the affairs of the company except if it is permitted by court.
2. Cannot act on behalf of the company.
If you are a director you must;
1. Disclose fully and truthfully to the liquidator all the property of the company and details of the disposal of any property by the company including property disposed of in the ordinary course of business;
2. Deliver all property of the company in or under their custody or control to the liquidator.
3. Appear to the liquidator for questioning if and when he sees fit.
BENEFITS OF WINDING UP A BUSINESS
What are the benefits of winding up a business/company?
a) The legal obligations imposed on the company will immediately cease e.g The obligation to file annual returns with URSB and tax returns with URA will immediately cease.
b) The company enjoys a sufficient degree of protection against execution or other legal processes.
c) Protects the interests of creditors.
d) The company is struck off the Register.
The company may acquire a new lease of life through business rescue mechanisms such as administrative receivership or administration.
Individual Insolvency/Bankruptcy
This is a process by which an insolvent is adjudged bankrupt and his or her assets are administered by a trustee in bankruptcy for the benefit of his or her creditors.
There are two ways of commencing individual insolvency proceedings;
a) Debtors Petition for Bankruptcy; where the debtor petitions court for a bankruptcy order by reason of his inability to pay his debts. The petition shall be in Form 2 in schedule 1 of the Insolvency regulations.
b) Creditors petition for Bankruptcy; where a creditor petitions court to make a bankruptcy order in respect of the debtor where he /she fails to satisfy a statutory demand.
Corporate Insolvency 
Winding Up
Administration 
Receivership 
Acts And Regulations 
| Service | Details | Cost |
| Application for Registration of Insolvency Practitioner | Requirements • Application Form- Form 1-Insolvency Practitioners Regulations, 2017 Supported by • Certified copies of the qualifications of the person • Proof of membership of the professional body. • Evidence of the professional indemnity •Evidence of a bank account for insolvency matters. •Proof of payment of fees • Any other document that the official receiver may require for purposes of compliance with the Act and Regulations |
150,000 |
| Communication of decision on the application | ||
| Filing Annual Returns by Insolvency Practitioner | Annual Returns for Insolvency Practitioners – Form 3 of Insolvency Practitioners Regulations, 2017 | 50,000 |
| Search on Register | Application to search on Insolvency Practitioners Register | 20,000 |
| Investigation and Prosecution | ||
| Service | Details | Cost |
| Investigation of Conduct of Insolvency Practitioners; Directors, Shareholders, Contributories of Insolvent Companies; Promotion, Formation, Failure and Conduct of Business of Insolvent Company | A complaint, shall specify the: – • names and physical address of the person against whom the complaint is made; • names and address of the complainant; • material particulars of complaint or allegation; • capacity of the person filing a complaint and • time that the action arose The Investigation report shall be made available within 60 days from the date of commencement of the investigation or at such a time as determined by the Official Receiver. |
|
| Winding Up of Companies | ||
| Service | Statutory Requirements | Cost (Ugx) |
| Members Voluntary Winding Up | This is a procedure for solvent companies initiated by the company’s members and involves the orderly winding-up of the company’s affairs, the appointment of a liquidator to manage the process of realizing the company’s assets, ceasing or sale of its operations, payment of its debts (if any) and distribution of surplus assets (if any) among its members. |
|
| Filing and Registration of Statutory Declaration of Solvency supported by Statement of Assets and Liabilities (Form 20 Insolvency Regulations,2013) | 50,000 | |
| Registration of Special Resolution for winding up and appointment of a liquidator | 20,000 | |
| Within 14 days give public notice of special resolution to wind up and appointment of liquidator in the gazette and Newspaper | Fees determined by UPPC and Newspaper of choice | |
| Filing of copies of public notice of the special resolution of winding up and appointment of Liquidator. | Free | |
| Filing of any report required to be filed under the Act- Preliminary Report, Interim Report and Final Report | 20,000 | |
| Creditors Voluntary Winding Up | It is a procedure, instigated by an insolvent company, by which the assets of the insolvent company are sold, and the proceeds are distributed to the company’s creditors. At the end of the liquidation, the company is dissolved. The process is managed by a liquidator. A company goes into CVL after its directors realize that its liabilities exceed its assets or it cannot pay its debts as they fall due and so the company cannot carry on its business. | |
| Cause a meeting of the creditors of the company on the same day as the meeting for the resolution for Liquidation is to be proposed or on the following day. | ||
| Notice for the meeting of the creditors to be advertised in the gazette and newspaper of wide circulation. | Fees determined by UPPC and Newspaper of choice | |
| File copy of the notice in the gazette and newspaper. | Free | |
| Registration of Special Resolution for winding up and appointment of a liquidator | 20,000 | |
| Within 14 days give public notice of special resolution to wind up and appointment of liquidator in the gazette and Newspaper | Fees determined by UPPC and Newspaper of choice | |
| Filing of a copy of public notice of the special resolution of winding up and appointment of Liquidator. | Free | |
| Filing of any report required to be filed under the Act- Preliminary Report, Interim Report and Final Report | 20,000 | |
| Corporate Rescue | ||
| a) RECEIVERSHIP | ||
| Service | Statutory Requirements | Cost (Ugx) |
| Receivership | Registration of Notice of appointment of a receiver. Form 12 of Schedule 1 of Insolvency Regulations. *An appointed receiver should be a qualified insolvency practitioner. |
20,000 |
| Within 14 days give public notice in the gazette and Newspaper | Fees determined by UPPC and Newspaper of choice | |
| Filing of copy of Public Notice of Receivership and Appointment of receiver | Free | |
| Filing of any report by the receiver (Filed within 5 days after preparation) | 20,000 | |
| b) ADMINISTRATION | ||
| Service | Statutory Requirements | Cost (Ugx) |
| Administration | Filing and registration of special Resolution agreeing that the company needs to make a settlement with the company creditors | 20,000 |
| Filing and registration of special Resolution appointing a provisional Administrator. *An appointed provisional administrator should be a qualified insolvency practitioner |
20,000 | |
| Notice of appointment of provisional administrator Form 12 of Schedule 1 of Insolvency Regulations | 20,000 | |
| Filing of any report by the administrator every six months during the administration period. | 20,000 | |
| SCHEDULE OF FEES | ||
| Insolvency Fees (Amendment) Regulations, 2018 | ||
| FEES | Fee (Ug. Shs) | |
| On the filing of an order of public examination | 20,000 | |
| Where the Official Receiver acts as a provisional liquidator or provisional administrator. | 2,000,000 for every 30 days | |
| Where the Official Receiver acts as a liquidator, administrator or receiver of an insolvent company. | ||
| 2,000,000 for every 30 days | ||
| Where the Official Receiver acts as an interim receiver, trustee, special manager or supervisor of an individual debtor. | ||
| 2,000,000 for every 30 days | ||
| Fees for registration of an insolvency practitioner | 150,000 | |
| Filing annual returns by an insolvency practitioner | 50,000 | |
| Filing statement of affairs for company | 20,000 | |
| Filing a list of contributories | 20,000 | |
| Filing with the Official Receiver any report required to be filed under the Act | 20,000 | |
| Where the Official Receiver acts as an agent of a reciprocating state | ||
| 2,000,000 for every 30 days | ||
| Search in the insolvency practitioners register | 20,000 | |