Dissolution of a company

Business studies study module

The following are the circumstances that may lead to the dissolution of a company:

  • Failure to commence business within one year- If a company does not commence business within one year from the date of registration, it may be wound up a court order on application of a member of the company.
  • Insolvency – when a company is not able to pay its debts, it can be declared insolvent and wound up.
  • Ultra- vires – this means a company is acting contrary to what is in its objective clause. In such a case, it may be wound up a court order.
  • Amalgamation – two or more companies may join up to form one large company completely different from the original ones.
  • Court order – the court of law can order a company to wind up especially following complaints from creditors.
  • Decision shareholders – the shareholders may decide to dissolve a company in a general meeting.
  • Accomplishment of purpose or expiry of period of operation – a company may be dissolved on accomplishment of its objects, or on expiry of period fixed for its existence.

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