Winding Up

• Author: Suzanne Ffolkes Goldson
• Profession: Attorney-at-Law and Senior Lecturer in the Faculty of Law at The University of the West Indies, Mona
• Pages: 88-114

5. Winding Up

When the Companies Act 2004 was enacted, a decision was made not to amend

the provisions relating to corporate rescue, insolvency and winding up until the advent

of an Insolvency Act.1 e provisions relating to the winding up of insolvent companies

in the 1965 Companies Act, therefore, survived the new Companies Act 2004, until

the enactment of the Insolvency Act 2014, which has as its objects:

1. the rehabilitation of debtors and the preservation of viable companies,

having due regard to the protection of the rights of creditors and other

stakeholders; and

2. fair allocation of the costs of insolvencies with the overriding interest of

strengthening and protecting Jamaica’s economic and nancial system and

the availability and ow of credit within the economy.2

e old insolvency regime was time-consuming and costly, created stigma, created

little or no provision for rescue and rehabilitation of the business and aairs of the

debtor, and consisted of very few specialists. Oftentimes, other remedies were used

for addressing insolvency, including informal agreements, compromises, constructive

and remedial trusts, Mareva injunctions or freezing orders, and the oppression

remedy. Any of these remedies, however, could put the debtor at further risk. Prior

to the Insolvency Act, the Companies Act contemplated rescue through Schemes of

Arrangement, otherwise, death of the company was the only other option either by

receiverships or liquidation and winding up. ere were no provisions for voluntary

out-of-court arrangements for moratoria or temporary stays of execution.3

A number of provisions of the Companies Act 2004 have now been repealed or

amended to reect the Insolvency Act 2014. An insolvent company cannot now be

wound up under the Companies Act. e Insolvency Act provides, inter alia, for the

ling of a Proposal or an ‘Intention to Make a Proposal’ to creditors by a company

which is insolvent, or facing imminent insolvency, in order to provide short-term relief

from their claims. ere is an automatic stay of proceedings upon the ling of a notice

of intention to make a Proposal or when a Proposal is led,4 and special provision

is made for securing nancing during the stay of proceedings (Debtor in Possession

1. Report of the Joint Select Committee on the Bill Shortly Entitled e Companies Act

1998 dates January, 2001.

2. Insolvency Act 2014, s 3.

3. S Ffolkes Goldson, ‘e Reform of Jamaica’s Insolvency Law: Balancing the Interests of

Creditors and Debtors’ 37 (2) West Indian Law Journal 171.

4. Insolvency Act 2014, s 4 and 5.

Winding Up

89

Financing).5 e concept of the Proposal, therefore, facilitates the preservation of the

insolvents’ assets for the benet of their creditors, and also the rehabilitation of the

insolvents.

e old provisions on winding up of solvent companies, however, are retained

in the Companies Act 2004 which still largely reect the position under the repealed

Companies Act 1965.

A. Arrangements and Reconstructions

Section 205A, which is a new section, states that sections 206–211 of the

Companies Act,

…may be applied in conjunction or together with Part III of the Insolvency Act,

but where a notice of intention to make a proposal or a proposal is led under the

Insolvency Act in respect of a company, any compromise or arrangement between

a company and its creditors, or with any class of them, shall be eected only in

accordance with the Insolvency Act.6

Sections 206–211 are substantially the same as sections on arrangements and

reconstructions in the repealed Companies Act 1965. e old UK position is therefore

retained.7

Section 206 denes ‘arrangement’ for the purposes of sections 206 and 207 as

including a reorganization of the share capital of the company by the consolidation of

shares of dierent classes or by division of shares of dierent classes or by both those

methods. ‘Company’ for the purposes of section 206 and 207 means any company

liable to be wound up under the Companies Act.

Section 206(1) provides that a company, any creditor or member of the company,

or the trustee (where a company is in the course of being wound up), may make a

summary application to the Court to order a meeting of the creditors, or class of

creditors, or of the members of the company, or class of members in order to sanction

any compromise or arrangement that is proposed between them.

Section 206(2) provides that any compromise or arrangement agreed by a majority

in number representing three-fourths in value of the creditors or class of creditors or

members or class of members as the case may be, present and voting either in person

or by proxy, shall be binding on all those persons concerned and also on the company

or the trustee and contributories of the company (where a company is in the course of

being wound up), if sanctioned by the Court.

Section 206(3) provides that the order must be delivered to the Registrar for

registration and a copy of every such order shall be annexed to every copy of the

Articles of the company issued after the order has been made before it has legal eect.

5. Insolvency Act 2014, s 55.

6. Ibid., s 311 amending Companies Act 2004.

7. UK Companies Act 1948, s 206.