CORPORATE INSOLVENCY

LECTURE NOTES NO 9
REVISED AUGUST 2019
PREPARED BY MUHAMUD SEWAYA

LIQUIDATION
INTRODUCTION

Winding up is a term commonly associated with the ending of a company in

existence? In fact, winding up or liquidation is the process by which the assets of
the company are collected and realized, its liabilities discharged and the net
surplus, if there is one, distributed to the persons entitled to it.

Section 91 IA provides for jurisdiction for liquidation of companies in Uganda

to be exercised by the High Court.

Section 57 IA provides the modes of liquidation of a company which may be by

court ; voluntary or subject to the supervision of the court.

VOLUNTARY LIQUIDATION

Sec 58 – 86 IA

Provisions relating to the voluntary winding up of companies are contained under

Section 58 – 86 IA. There are two types of voluntary winding up: member’s
voluntary winding up and creditors’ voluntary winding up. The distinction between
the two types of voluntary winding up is that in members’ voluntary winding up
the directors of the company sign a declaration that the company will be able to
pay its debts in full together with interests within 12 months of the
commencement of the winding up and in a creditor’s voluntary winding up no
such declaration is made.

A voluntary winding up commences when the members of the company pass a

resolution for the company to be wind up – Sec 58 and that resolution must be
advertised in the Gazette and in the news paper in the official language with a
wide national circulation within 14 days - Sec 59(1) IA

The resolution has to be registered with the registrar and a copy sent to the
official receiver within seven days from the date of passing the resolution.
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Date of commencement

Winding up is deemed to have commenced at the time of the filling of the

application, or if the filling of the application takes place after the company has
resolved on voluntary winding up, at the time of the passing of resolution for
voluntary winding up. – Sec 58

The date of the winding up fixes the status and liability of contributories, it is the
critical time for the purpose of determining the validity of preference or floating
charge given by the company prior to winding up, it deprives unsecured creditors
of their ordinary remedies against the company.

Members’ Voluntary Liquidation

Sec 62 provides that the company shareholders by special resolution or the

directors or any other person authorized by the memorandum and articles of
association may appoint one or more liquidators for the purposes of liquidating
the affairs and distributing the assets of the company. After the appointment of
the liquidator, the powers of the director s cease.

Section 64 Power of a liquidator to accept shares or other interests as

consideration for sale of property of company.

Section 65 Duty of liquidator to call creditor’s meeting in case of insolvency and

to notify the registrar and the official receiver and call a meeting of the creditors
and to present a statement of the assets and liabilities of the company.

Section 66 Duty of liquidator to call a general meeting at the end of each year.
Failure to do so calls may be liable on conviction to a fine not exceeding 5 CP.
Section 67 Final meeting and dissolution
 Prepare an account of liquidation
 Call a general meeting and give any required explanation
 Notice in the Gazette and in the new paper of wider circulation in
Uganda
 14 days after meeting, the liquidator shall send a copy to registrar
 Registrar required to register them
 3 months after registration of returns the company shall be taken to be
dissolved unless court orders otherwise
 Liability for any person who contravenes this provision.

Creditor’s voluntary Liquidation

Section 69 provides for the voluntary liquidation, the company shall:

 Cause a meeting of the creditors to be summoned on the same day as
the meeting for the resolution for liquidation
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 Notices of the meeting to be sent to the creditor for proposing the

resolution for liquidation
 The notice has to be gazetted and also in the newspaper of wider
circulation
 The directors of the company shall appoint one of them to preside at
the meeting and to present a full statement of the position of the
company’s affairs.
 Any r resolution passed is binding to the company.
 Any default made in the process makes the company or directors
liable to a fine not exceeding 50 CP

Read Cases:
- Noble Builders (ltd ) v Jaspal S Sandhu (1997-2001) UCLR 110

- Re Imperial Investment Finance Ltd (2007) ULR 571

- Re Mastermind Tobacco (U) Ltd Tobacco & Comodity Trading

International Incorporated (2002-2004) UCLR 414
-
Section 70 Appointment of liquidator
The company and the company creditors at their respective meetings may
nominate a person to be a liquidator for purposes of liquidating the affairs and
distributing the assets of the company.

Section 71 Appointment of committee of inspection

The creditors at their meetings may appoint not more than 5 persons to be
members of a committee of inspection.
Section 72 Proceedings of committee of inspection:
 committee to meet once in month
 Committee shall act by a majority of its members present
 Resignation by notice in writing
 Member to vacate if becomes bankrupt or absent for 5 times
 A member to be removed by creditors by ordinary resolution
 If there is a vacancy of a member liquidator to call a meeting

Read:

- Re Global Tours & Travels Ltd (2001) EA 105

- Sembule Steel Mills Ltd v Salzigitterhamdal GMBT ( 2002) KALR 412

(Application to stay winding up)
- Sec 254(1) CA
- Re Metro cash & carry (U) Ltd Misc appl No 440 of 2007 arisising out
of company cause no 15 0f 2007
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Section 72 Proceeding of committee of liquidation

Section 73 provides for Liquidator’s remuneration and cessation of direct or’

powers Committee of inspection or where there is no committee, the creditors
may fix the remuneration to be paid to the liquidate.

With regard to remunerations, a liquidator, is paid in an amount or by way of

percentage or otherwise as the court direct. Where there is more than one
liquidator, the remuneration is distributed among them in such proportion as
directed by the court.

Section 73(2) IA
On the appointment of a liquidator, all the powers of the directors shall cease,
except so far as the committee of inspection or where there is no committee, the
creditors, sanction the continuation.

Section 77 Final meeting and dissolution

As soon as the company is fully liquidated, the liquidator shall:
 prep pare and account of the liquidation showing how liquidation was
conducted.
 Call a general meeting of the company and a meeting of creditors
 It is an offence not to call a meeting.
 Notice has to be in the Gazettee and the newspaper and to be published at
least 30 days.
 14 days after meeting to send returns to the Registrar of companies.
 On the expiration of three months from the registration of the returns, the
company shall be taken to be dissolved unless court orders otherwise.

Distribution of the Property of a company

Section 79
Provides that subject to the provision of this Act on preferential payment, the assets of a
company shall on its liquidation, be applied in satisfaction of its liabilities
simultaneously and equally, and, subject to that application shall unless the articles of
association otherwise provide, be satisfied among the members according to their rights
and interests in the company.

Read section 14 IA

Section 80 Powers & Duties of Liquidator in Voluntary Liquidation

Include:
 Exercise any power given by the court
 Settling a list of contributories
 Exercise the power of the court of making calls and shares or any other
matter
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 Summon meetings of the company

 Pay debts of the company

Read:
 Simba Airlines Ltd v Heritage Bank Ltd (2002) 1 EA 302

 Mastermind Tobacco(U) Ltd Tobacco & Commodity Traders

International Incorporated, Re UCLR 2002 – 2004

 Re Metro Cash and Carry (U) Ltd Misc App 440 of 2007, HC U
* Re Windsor Steam (1929) 1 CH 151

The basic duty of the liquidator is to collect and realize the company assets. Title
to the company’s assets is not automatically vested in the liquidator unless
exceptionally, the court so orders. The directors’ appointment automatically
ceases and the liquidator takes into his custody and control the company’s
property.

A liquidator may be a watchdog for the unsecured creditors and the shareholders
against improper practice by a receiver. But in many cases he is a weapon to be
used with discretion. His appointment terminates the receiver’s agency and will
normally lead to a receiver ceasing to curry on business.

In order to fulfill their duties liquidators are given a wide range of powers, some of
which can be executed of their own volition entirely others of which need the
appropriate consent.

The powers given under section 87 IA are subject to control by the court and a
creditor or contributory may apply to court with regard to the exercise or
proposed exercise of those powers.

One of the most important decisions a liquidator will have to take is whether to
keep the company’s business going and if so, for how long. It should be noted
that liquidators may only do so in as far as it may be necessary for the beneficial
winding up of the business.

In British and Commonwealth Holding Plc v Spicer and Oppenheim (1992)

ALLER 876, it was held that to assist liquidators to get a complete picture of the
company’s affairs, liquidators have extensive powers to inquire into the
company’s dealings and to seek the court’s assistance by summoning persons to
appear before it, or requiring persons to submit affidavits or produce books,
documents or other records relating to the company.

While the liquidation is in progress individual, contributories or creditors can

apply to the court to control the exercise or proposed exercise of any liquidator’s
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power. Any person aggrieved by an act or decision of the liquidators may apply
to the court.

An apt summary of the liquidators status that he is an agent of the company

was stated by Cotton LJ in Re Silver Valley (1882) 71 Ch D 381 as occupying a
fiduciary position, who is employed for a remuneration to carry out a particular
statutory task to whose performance he is bound to bring reasonable,
professional skills. He must act honestly and impartially, serving the interests of
the general body of creditors but be mindful also of the residual interests (if any/
of the contributories) . He must offer all interested parties reasonable assistance
and information to enable them to ascertain and exercise their rights.

Liability of Liquidator

The liquidator is both as an officer of the court and an agent of the company for
purpose of winding up the company. He thereby occupies a fiduciary position
towards the company’s creditors as a body but is not a trustee for individual
creditors or contributories in the true sense of the term.

In Rudewa v Commissioner of Stamp Duties (1966) EA 576, it was held that

he is not liable for negligence but only for fraud in his execution of duties.

The liquidator must exercise a high degree of care and diligence in his dealings,
if he is to escape, liability, thus in Re Home and Colonial Insurance Company
Ltd (1930) I Ch 102, a liquidator paid a claim which he subsequently discovered
to be invalid, it was held that he was negligent in not taking legal advice or
applying for directions of the court, consequently he was liable to compensate
the company.

Read:
- Re Builtbead Ltd (2003) 4 All ER 864

- Simba Airlines v Heritage Bank (2002) 1 EA 302

Section 82 Notice of liquidator ‘s appointment

14 days after appointment,, publish in the Gazette and deliver to the registrar for
registration, a notice with a copy to the official receiver of the appointment in the
prescribed form.

Section 83 Arrangement when binding on creditors.

An arrangement entered into between a company which is about to be or is in the course
liquidated and its creditors, shall subject to the right of appeal under this section be
binding on the company if sanctioned by a special; resolution and on the creditor if
accepted to by ¾ of the total number and value of the creditors.
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Persons disqualified from acting as liquidator

Section 206
 A creditor of the company in liquidation or under administration or of an
associated company; or
 A person who has within the previous two years been a shareholder, director,
auditor or receiver of the company in liquidation or under liquidation or of any
associated company

Costs of Liquidation
Section 85

All costs, charges and expenses properly incurred in the liquidation, including the
remuneration of the liquidator, shall be payable out of the assets of the company in
priority to all other claims.

Section 86 Rights of creditors and contributories

The voluntary liquidation of a company shall not bar the right of any creditor or
contributory to have it liquidated by court but in the case of an application by a
contributory, the court shall be satisfied that the rights of the contributories will be
prejudiced by a voluntary liquidation

EFFECT OF WINDING UP & DISSOLUTION

Effect of Voluntary Liquidation

The effect of voluntary liquidation is that the company ceases to carry on

business , except so far as may be required for the beneficial liquidation of the
company. – 60(1) but the corporate status and powers of the company shall
continue until dissolved.

No transfer of the company’s assets is allowed unless with the consent of the
liquidator – 61IA

Effect of Appointment of Liquidator

On the appointment of a liquidator the powers of the directors cease, except

where authorized by the company in general meetings, or the liquidator in a
members’ voluntary winding up.

Cheques drawn by directors or other instructions given by them after the

liquidator is appointed are not binding on the company.

In Stead, Hazel and Company v Cooper (1933) 1 KB 840, it was held that
when carrying out their function, liquidator act as agents of the company and any
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contract a liquidator makes will be between the company and the outsider and
the liquidator will incur no personal liability.

In Re Corbenstoke Ltd (No.2) 1990) BCLC 60, it was held that liquidators are in
a fiduciary relationship with the company and must not place themselves in a
position of conflict of interest. Liquidators must not make any unauthorized profit
from their position and any purchase of the company is properly reliable to be set
aside.

He is required to have regard to the directions of creditors, contributories and the

committee of inspection.

The liquidator is also obliged to summon meetings of creditors when directed by

their resolution also summon a meeting on his own volition to ascertain the
wishes of contributions/ creditors. The liquidators must keep proper books of
account, which may be open to creditors.

Liquidation does not destroy the company’s corporate identity or powers, but it
does place the company and those who control its affairs under certain
disabilities. Liquidation terminates the powers of the company to carry on
business except for the limited purpose of winding up its affairs. It also puts an
end to the company’s capacity to dispose of its assets and restricts the rights of
creditors to take proceedings to enforce their remedies against the company or
its property. Dissolution is an event, which takes place only after affairs of the
companies have been fully wound up.

Read:

Mohammed Muwanga v Lint Marketing Board( in Liquidation) (1999) KALR

592

Effect on the company

A company which is in liquidation cannot dispose of the property, other than

through the liquidator; In a voluntary liquidation the company must cease to carry
on its business, unless the liquidator believes the company should continue to
trade to enable the winding up of the business. Neither the creditors nor
members acquire any interest in the company’s property by reason of the
winding up. The liquidator and he alone, controls the company’s property which
remain owned by the company until it is sold.

Disposition of property

The court has a discretionary power to declare that any disposition is not void. A
creditor, which obtains property from a company after a winding up application
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has been filed, loses that property unless the court validates the disposition.
Under Sec 15 – 19 IA. ( see lecture No 6)

Effect on Receivership

Section 194 IA

Re Muddu Awulira Enterprises Ltd (2002 – 2004 ) UCLR 418

Held that the commencement of winding up proceedings against the company
did not preclude the debenture holders from appointing a receiver. However, the
taking possession of any of the company’s assets during the currency of the
winding up proceedings under execution or attachment was in violation of then
section 228(repealed) of the Companies Act.

The assets which the appointed receiver took possession of were part of the
respondent’s assets for which a status quo had been maintained by the court.
The receivers therefore had no access to them without leave of court and the act
of taking possession of the respondent’s assets declared void. Leave of court
was need before the receiver could take possession of the assets.

Effect on Directors power

It is generally accepted that most of the powers of the directors come to an end
with the appointment of a liquidator. Accordingly, the directors have no power to
conduct proceedings on behalf of the company, or to make valid calls on
shareholders and their acts have no binding effect as far as the company is
concerned. – Sec 73(2) IA.

Under Section 110 the director , secretary or employee shall 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 and shall deliver to the liquidator or in accordance
with the liquidator’s directions all property of the company in or under his or her
custody or control.

Effect on contracts

Where part of the property of a company consists of land burdened with onerous
covenants, shares, and property that are unreliable or not readily saleable or
unprofitable contract, the liquidator may disclaim the property. The disclaimer
operates to terminate from the date of the disclaimer, the right, interests and
liabilities of the company and the property of the company.

Apart from contract of employment, contracts to which the company is a party

are not automatically terminated by liquidation, unless there is a term to that
effect in the contract itself. If the effect of liquidation is to render the company
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incapable of performing any of its obligations under the contract, the other party
may duly treat the contract as terminated by breach.

Effect on Shareholder
Any transfer of share made after the commencement of the winding up is void.
Accordingly, shareholder is prevented from evading this ability as a contributory
by transferring his share to some impecunious person after winding up has
commenced.

Available assets and other transactions

The assets of the company whether it is solvent or insolvent, comprise all

property which belongs to it at the commencement of it’s winding up. Courts have
held that “assets” embrace all the real and personal property of the company,
including chose in action such as goodwill, unpaid calls on shares, and rights of
action for compensation. Non-assignable contractual rights and property held in
trust are not included, nor is property which has been validly mortgaged or
charged or which is subject to some other form of enforceable encumbrance.

Read
- Section 79 IA

- Appolo Hotel Corp Ltd v Geoffrey Oryema & Others (2007) ULR 175 –
Held that ownership of a company is a question of law. In determining
ownership of a company regard must be had to the instrument conferring
ownership.

Preferential payment to creditors

A liquidator has power to recover any payments or other transfer of property

made by the company to its creditor within 12 months prior to the date of the
filing of the winding up application. Section 15 – 19 IA and section 61 IA

Judgment Creditors

Where a judgment creditor has levied execution and completed it by sale before
the winding up, he may keep the proceeds. If the execution is incomplete or sale
has not been carried out, the property must be given to the liquidator, but the
judgment creditor is entitled to receive the cost of the execution and prove for the
debt.

Rights of contributories

If the debts are insufficient to satisfy the creditors, then the contributories must
bring in the sums due from them in accordance with the principles. If however,
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when all the debts have been paid there are surplus assets then these are
available for the repayment of capital to the contributories and in certain cases
the residue may exceed the nominal capital of the company and there may be
even longer to distribute. The way in which the balance is distributed among the
contributories will depend upon the rights attaching to the particular shares. It
was held in Re Roberts and Cooper Ltd (1929) 2Ch 383 that if preference
shares are preferred as to capital on winding up, they will be paid in full before
the ordinary shares receive anything.

Section 14(b) IA

If they are not so preferred they will rank equally with the ordinary shares and, if
the assets are not sufficient to repay the whole of the capital, both classes will be
paid in equal proportion.

Publicity to third Parties

In order to avoid loss or inconveniences to parties who may have dealings with
the company after it has gone into liquidation, the law imposes the requirement
that every invoice, order for goods or business letter issued by or on behalf of the
company or the liquidator after the winding up order must contain a statement
that the company is in liquidation.

A criminal penalty in the form of a fine is imposed upon the company any of its
officers, or the liquidator who knowingly and willfully authorize or permit default in
respect of this requirement..

ASSETS AVAILABLE FOR DISTRIBUTION

The fundamental principles governing the distribution of assets are:- First, only
the assets of the company at the time it goes into liquidation are available for its
creditors. Secondly, what constitutes an asset of the company is to be
determined primarily by the general principles of property and contract law
applicable to solvent parties.

The assets of a company in liquidation like those of a solvent company, are not
confined to physical things or to thing which are fully owned by the company. Any
beneficial interest held by the company, whether, in tangible or intangible
property and whether full or limited, indefeasible or defeasible held absolutely or
held by way of security constitutes an asset, thus the company’s assets may
include freehold, leasehold property goods owned by the company, possession
of goods under a lease or hire purchase agreement, negotiable instruments held
by the company, intellectual property rights, contract rights and security interests
in tangible or intangible property owned by another. But the company must hold
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the beneficial interest. Assets beneficially owned by others to which the company
has a bare legal title and not available to its creditors.

Post Liquidation Receipts

The assets coming under the control of the liquidator at the time of winding up
may be augmented subsequently in various ways. The question then arises
whether those represent an addition to the company’s general assets so as to
be susceptible to capture by a prior assignment or charge, including a fixed or
floating charge covering after acquired property, or whether they are to be
treated as held by the liquidator the benefit of the general body of creditors.

Disclaimer of Onerous property

Sec 107

The liquidator’s ability to repudiate the company’s obligations under a contract by

the simple device of not performing them is buttressed by wide statutory powers
to disclaim onerous property under.

Onerous property is any unprofitable contract and any property of the company
which is un saleable or is not readily saleable or in such that it may give use to a
liability to pay money or to perform any other onerous act.

The purpose if the disclaimer is to allow the liquidator to complete the

administration of the liquidation without being held up by continuing obligations or
the company under un profitable contracts or continued ownership and
possession of assets which are of no value to the assets.

It should be done in mind that liquidation does not of itself bring a contract to an
end, nor is it necessary a ground for the solvent party to terminate the contract.
The liquidator is not obliged to procure the company to continue performance if
he considers this would not benefit the company but neither can he compel the
other party to treat the contract as at end.

Lord Nicholls in Hindcastle Ltd v Barbara Altenborough Association Ltd

(1996) ALL ER 737, after exploring the history of the disclaimer pointed out the
purpose of these is to facilitate the administration of the winding up by freeing the
company in liquidation from all liability under the lease.

The effect of a disclaimer is to determine, as from the date of the disclaimer, the
rights, interest and liabilities of the company in or in respect of the property
disclaimed.
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DISTRIBUTION OF ASSETS And PRIORITY OF PAYMENT OF CREDITORS’

CLAIMS

Refer to section 6 – 14 IA

Also refer to lecture notes on Creditors Claims

Contrary to what might be supposed, the administration of an insolvent debtor’s

estate does not involve the payment and discharge of all the debts owing by the
debtors which are provable in the insolvency and which are proved which will
receive any payment. The principle rule is that the company must have been
liable on the debt at the time of going into liquidation and all debts by creditors
are provable as debts against the company whether they are present or future
certain or contingent, ascertained only in damages. The liquidators examine the
proof and may admit all or part of the debt or may reject it.

Insolvency rules provide that whenever the liquidator has sufficient funds must
declare and distribute dividends among the creditors in respect of the debts
which they have respectively proved, but that he must do so subject to the
retention of sums as may be necessary for the expenses of the winding up.
Creditors must be notified of the declaration of a dividend, and information to
enable them to comprehend and must be given sufficient information to enable
them to comprehend the calculation of the amount of the dividend and the
manner of it’s distribution.

Read:
- Re HIH casualty & General (2008) 3 All ER 869

EFFECT OF DISSOLUTION

The date when dissolution becomes effective marks the termination of the
company’s legal personality, and hence of its existence. It is this consequence of
the winding up process – regardless of whether it is the voluntary or the
compulsory mode which is employed which constitutes the fundamental point of
distinction between the insolvency of a corporation and that of an individual.

In the case of the bankruptcy of an individual, the ultimate reinstatement of the

debtor to full legal status and capacity is at all times in prospect through the
eventual gaining of discharge from bankruptcy, whereas no such outcome is
possible through the completion of the winding up process. This is the case even
though it may transpire that the company realized assets, despite initial
appearances to the contrary, are sufficient to discharge all liabilities, which are
eventually admitted to proof.

Every creditor, and every person with a claim of any kind against the company, should
therefore bear in mind that at the conclusion of the liquidation all liabilities will be
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extinguished forever, since there will be no subsisting legal person by whom any liability
is owed nor any prospect that unsatisfied liabilities may be settled out of a sense of moral
obligations by a person against whom no legal enforcement is capable of taking place.

SUPERVISION OF LIQUIDATION BY COURT

Section 87 IA Power to order liquidation subject to supervision

Section 88 IA Effect of application for liquidation subject to supervision

Section 90 IA effect of supervision order

LIQUIDATION BY COURT

The court may appoint a liquidator on the application of the company , a director,
shareholder, creditor, contributory and the official receiver. – sec 92 IA and the court
may make an order if it is satisfied that the company is unable to pay its debts within the
meaning of section 3.

Section 92(3) IA provides that on hearing a petition the court may dismiss it or adjourn
the hearing conditionally or unconditional or make any interim order that it thinks fit but
th3 court shall not refuse to make a winding up order on the ground that the assets of the
company have been mortgaged to an amount equal to in excess of those assets or that the
company has no assets.

Commencement of the liquidation by court commences when a resolution is passed by

the company from voluntary winding up and in other cases it commences at the time of
presentation of the petition for liquidation.

A provisional liquidator can be appointed under section 94 and shall within 14 days of
appointment give public notice of the date of commencement of the liquidation and call
share holder’s meeting – sec 95.

The liquidator shall within 5 working days after the appointment give notice in the
Gazette and a newspaper of wide circulation and notice to give particular information.

Section 96(2) IA A liquidator shall give notice of the liquidation on every invoice , order
for goods or business letter issued by or on behalf of the company on which the
company’s name appears stating after the company’s name the words “in liquidation”

Failure to comply with subsection (2) does not affect the validity of a document issued
by or on behalf of the company.. A liquidator commits an offence and is liable on
conviction t a fine not exceeding 100 CP
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Effect of liquidation by Court

Section 97
 Liquidator takes custody and control of the company property.
 Officer of the company remain remains in office but cease to have any powers ,
function or duties other than those permitted by the Act.
 Proceedings execution or other legal process shall not be commenced or
continued and distress shall not be levied against the company or its property.
 No transfer of shares or alteration of shares
 Memorandum and articles of association not to be altered except the registered
office or address.
 Nothing shall prevent the exercise of a power of enforcement of a charge over
property.
 Liquidator may appoint a suitable person to be special manager of the company
under section 98.

Fundamental and General duties of liquidator

- Section 99 IA
- Section 100 IA
- Section 101 IA
 Collect Realize as advantageously as reasonably possible and distribute the assets
or the proceeds of three assets of the company.
 Take custody and control of all the company’s assets
 Register his/ her interest in all land and other assets belonging to the company
notwithstanding any other interest
 Keep company money separate from other money held by or under the control of
the liquidator
 Keep records of accounts and other transactions
 Permit records to be inspected by committee of inspection, any creditor or
shareholder.
 To have all powers under the Act and may delegate the powers to his appointed
agent.

Liquidator’s Reports
Section 103 – 104 IA

A liquidator shall within 20 working days aft the end of every six months during
liquidation make an interim report and give public notice of the conduct of the
liquidation. The Report shall be inspected by every creditor, shareholder or contributory.
The notice shall be published in the official language.

Before completion the liquidator public notice of the final report, final accounts and the
grounds on which a creditor or share holder may object to the removal of the company
from the register under the companies Act.
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Liquidator’s other powers

The liquidator has powers to obtain documents under section 105. A person shall not
withhold a document of the company from liquidator on the ground that possession of the
document creates charge over property.

The liquidator also has power to examine and obtain information from director, secretary,
shareholder, employee, receiver or administrator. The person may be required to appear
before the liquidator at a reasonable time. A person who appears before the liquidator is
entitled to a resaeranable remuneration.

Section 106(8) a person shall not be excused from answering any question on the ground
that the answer may incriminate or tend to incriminate him or her.

Section 106(9) provides that the testimony of any person examined under subsection (2)
or (7) is not admissible as evidence in any criminal proceedings against that person
except on a chrage of perjury in respect of the testimony.

Read:
- Re Mid East Trading Ltd (198) 1 All ER 577
- Re Pantmaenog Timber Co Ltd ( In Liquidation)(2001) 4 All ER
588
- Re Galileo Group Ltd (1998) 1 All ER 544

- R (Griffin) v Richmond magistrates Court (2008) 3 All ER 274

Section 108 – Pooling of assets of associated company

Under section 111 it is stated that where a person does not comply with a requirement of
a liquidator under section 105 or 110 the court may on the application of the liquidator
order the person to comply and make ancillary orders as it thinks fit.

- Section 112 - Search and Seizure powers

- Section 113 - Absconding during or pending liquidation’

Where a company is liquidation or where a petition for liquidation has been made to
court, a person shall not leave or attempt to leave Uganda with the intention of avoiding
to make payment of money due to the company; avoiding examination of the affairs of
the company ; or avoiding compliance with an order of the court or some other
obligation under the Act with respect to affairs of the company. Or conceal or remove
property of the company with the intention of preventing or delaying the assumption of
custody or control of the property by the liquidator, destroy , conceal or remove records
or documents of the company. Section 113(2) a person who contravenes sub section(1)
commits an offence and is liable on conviction of not more than seven years.

Completion of Liquidation
Section 114
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The liquidation 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 all
known assets an have been disclaimed , realized or distributed; all proceeds of realization
have been distributed and in the opinion of the liquidator the company should be
removed from the register. On delivering to the official receiver the documents , the
liquidator shall cease to hold office but this does not limit the application of section 117
and 118.

Supervision and enforcement by the court

Sections 117 and 118
Liquidation may be supervised by court on the application of the liquidator, committee of
inspection, official receiver, any creditor, shareholder or director of company and the
court may give directions on any matter arising during the course of the liquidation;,
modify any decision of the liquidator, order an audit of accounts, order of production of
records; revise the remuneration of the liquidator, declare the validity of the appointment
of liquidator, make an order concerning records of the company, etc.
Where the liquidator fails to comply with any of his / her duties, the court may on such
terms and condition as it considers fit:
- relieve the liquidator of the duty to comply wholly or in part
- order the liquidator to comply to the extent specified in the order
- remove the liquidator from office
An application for an order may be made by a liquidator, committee of inspection,
creditor, shareholder or a director or receiver. A copy of the application has to be served
on the liquidator not les than 5 working days before the hearing of the application. All
proceedings relating to any application for an order shall be served on the official
receiver who shall keep a copy of the proceedings on a public file.

Vacation of the Office of Liquidator

Section 109
- Removed from office under section 118(1)© 0r 204
- Resigns
- Dies
- Becomes unqualified under section 206
- Vacates office under an administration deed.
Read:
 Chapter 10 of Chrispas Nyombi & Alexander Kibandandama’s Principle
of Company Law in Uganda, Law Africa Publishing 2014 , pages241 –
278
 Slaughter & May, An Introduction to English Insolvency Law May 2015
(On line materials)

SM
August 2019
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