This is a new provision. It was recommended by our Committee on Company Law. The object of this and later sections is to get rid of a major defect which has existed in the law relating to voluntary winding up for many years. At the moment the winding up proceeds under the control of the members of the company, whether the company is solvent or not; under the new régime, as set out here in the Bill, if the directors want the winding up to continue under the control of the members, then they must make a declaration of solvency. If they are not able to make that declaration, then it becomes a creditors' winding up and the creditors take control. The people who will be affected most are the creditors and the members should take second place. That is briefly the scheme of things which is set out in Sections 256 to 273.
SECTION 256.
Question proposed : " That Section 256 stand part of the Bill."
Do the creditors appoint the liquidator?
In a members' voluntary winding up, the members appoint him. In a creditors' voluntary winding up, to a large extent the wishes of the creditors are given precedence, as you will see from a later section.
Question put and agreed to.
Section 257 agreed to.