The decision to wind up a company is a significant one, often marking the end of its corporate journey. In Nigeria, the winding up process is governed by the Companies and Allied Matters Act (CAMA) 2020, which provides a structured framework to ensure that a winding up is carried out lawfully and transparently. CAMA recognises three (3) modes of winding up which are:
- Winding up by order of court,
- Voluntary winding up by members of the company, and
- Winding up subject to the supervision of the court.
Among the above, voluntary winding up by members or shareholders is the most common and least bureaucratic. Chapter 22 of CAMA outlines two procedures for voluntary winding up in Nigeria. The procedures include:
- Members’ Voluntary Winding Up (MVL): This is applicable when the company is solvent and can pay its debts in full within 12 months of commencement (Sections 627 – 633, CAMA).
- Creditors’ Voluntary Winding Up (CVL): This is applicable when the company is insolvent, requiring creditors to take charge of the liquidation process (Sections 635 – 641, CAMA).
This article focuses specifically on the Members’ Voluntary Winding Up (MVL) procedure, providing a step-by-step guide to obtaining approval from the Corporate Affairs Commission (CAC).
- When is Members’ Voluntary Winding Up (MVL) suitable?
MVL is suitable when shareholders of a solvent company decide to dissolve it voluntarily. Unlike compulsory winding up, which is initiated by a court, MVL is initiated internally by members in circumstances such as when:
- The company has achieved its objectives,
- The company is no longer profitable, or
- The owners wish to close operations in an orderly manner.
2. What are the key features of a Members’ Voluntary Winding Up (MVL)?
Before proceeding with MVL, the company must ensure it qualifies for the process. Key features include:
- Solvency: The company must be able to pay its debts in full within 12 months (Section 625, CAMA).
- Voluntary initiation: Shareholders must pass a resolution to wind up the company. (Section 620, CAMA)
- Orderly closure: Assets are liquidated, liabilities settled, and any surplus distributed to members.
3. What are the procedures for winding up of a company under the MVL?
The MVL process is divided into three stages:
Stage One: Declaration of Solvency
At this stage, the Members of the Company are expected to:
- Pass a special resolution to wind up the company voluntarily.
- Appoint an accredited liquidator in accordance with the provisions of CAMA 2020 (Section 627, CAMA)
- Publish the special resolution on two national newspapers within 14 days after the passing of the resolution. (Section 621(1), CAMA)
- Prepare a statutory declaration of solvency within the five weeks immediately preceding the date of the passing of the resolution for winding up (Section 625(2), CAMA)
- Ensure that the filing of annual returns of the Company are up to date.
- File all the above documents, including the resolution and declaration of solvency, with CAC within 15 days of passing the resolution.
Stage Two: Appointment of Liquidator
Once CAC approves the first stage, the company is required to file the resolution appointing the liquidator along with the documents as follows:
- CAC acknowledgement letter of the first approval.
- Liquidator’s accreditation letter from CAC.
- Two national newspapers publications showing the appointment of the Liquidator.
Please note that upon approval, the liquidator assumes control of the company’s assets. (Section 627(2), CAMA)
Stage Three: Final Meeting and Accounts:
After CAC approves the liquidator’s appointment, the liquidator takes control of the company’s assets, settles debts, and distributes any surplus to shareholders. Once the affairs of the company are concluded, the liquidator convenes a final general meeting to present the company’s final accounts.
Notice of the final meeting must be published in the official gazette and two national newspapers at least one (1) month before the final meeting (Section 631(1)-(2), CAMA).
After the publication of adequate notice for the final meeting and the presentation of final accounts to the Members of the Company, the liquidator is expected to do the stage three filing of the winding up process on the CAC portal within seven (7) days along with the documents:
- Gazette and newspaper publications of the final meeting notice.
- The extract of the final meeting for the presentation of final accounts.
- Liquidator’s Final Statement of Account.
- Report of the Auditor.
- Liquidator’s final report to the Members
- The CAC acknowledgement letter of the first and second approval.
After the filing of the final meeting and accounts of the Company, the CAC registers the return (i.e. approves the winding up by issuing a Letter signed by the Registrar-General).
Please note that the company is deemed dissolved at the expiration of three (3) months after the date of CAC Letter.
4. What is the timeline for completing the winding up under the MVL procedure?
Based on the statutory deadlines, winding up under the MVL procedure can typically be completed between three (3) to four (4) months, subject to prompt filings and approvals by the CAC.
Ultimately, the Members’ Voluntary Winding Up process under CAMA 2020 provides a clear and structured pathway for solvent companies to cease operations in Nigeria. MVL is generally faster and less costly than compulsory winding up. By following the statutory steps, declaration of solvency, shareholder resolution, appointment of a liquidator, and final dissolution, companies can close their affairs efficiently while safeguarding the interests of creditors and shareholders.
To avoid unnecessary delays, companies should engage experienced legal to ensure full compliance with CAMA 2020.
