A. What kind of companies can be wound-up?
Only a limited company can be wound-up. The term “winding-up” (or “wound-up”) bears a similar meaning of “liquidation”. It generally means that all the assets of the company would be realized (sold off and converted to cash) through a legal process in order to repay its debts. Winding-up would bring a company to an end.
A limited company is a company that is registered under the Companies Ordinance (Cap. 32 of the Laws of Hong Kong). It is a separate legal entity (i.e. it can sue or be sued in legal proceedings). The liabilities of shareholders are limited to the value of the company’s shares held by them (limited by shares). Another situation, which is not common in commercial organizations, is that the liabilities of shareholders are limited to the amount in which the shareholders have agreed to contribute to the company's assets if the company is being wound-up (limited by guarantee).
An “unlimited company” or a sole trader is not a “company” in a strict sense. It is a business operated in the form of a sole proprietorship. In other words, the business is owned by an individual. A sole proprietor is solely and personally responsible for the liability of the business.
A partnership is a form of business owned by two or more persons (partners). The partners are personally jointly and severally liable (i.e. every partner should be liable) for the liability of the business.
An overview of winding-up procedures
You can get a general picture on the winding-up procedures (except “ voluntary winding-up ” ) from the following chart:
Issuing a written demand for debt repayment to the target company
Presenting a winding-up petition to the Court and the company (Note)
Court hearing for the petition
Granting of winding-up order by the Court
Meeting of creditors and other relevant parties
Appointment of liquidator
Realization and distribution of company’s assets to the creditors
Release of duties for liquidator
Dissolution of the company
Note: The winding-up proceedings should be deemed to commence at the time of presenting the winding-up petition to the Court.