Problematic of liquidation and dissolution of companies under rwandan law: case study of Rwandatel

I.1.3 Company liquidation

Liquidation is referred as winding up of a firm by selling off its free un-pledged assets to convert them into cash in order to pay the firm's unsecured creditors. That is, the secured creditors take control of the respective pledged assets on obtaining foreclosure orders^12(*). The remaining amount is distributed among the shareholders in proportion to their shareholdings. It is initiated either by the shareholders when it is voluntary or by the court when it is compulsory. A company is placed into liquidation when it is unable to pay its debts.

After defining the key words, the researcher will go into deep in order to understand well the subject of this research.

I.2 Categories and types of companies

In this part, the researcher is going to classify companies basing on their categories and types. She refers to the laws and that classification will be conducted under Rwandan laws or laws of other countries.

I.2.1 Categories of companies

According to the law N°07/2009 of /2009 relating to companies, in its article 5, every company shall be incorporated to fall in the categories of companies which are private company and public company.^13(*)

I.2.1.1 Private Companies

A private company is the one whose ownership is private. That is, a business company owned either by non-governmental organizations or by a relatively small number of shareholders or a company members which does not offer or trade its company shares to the general public. As a result, it does not meet the strict Securities and Exchange Commission filing requirements of public companies. They issue stock and have shareholders. However their shares are not allowed to trade on public exchanges and are not issued through an initial public offering. That is, its shares are less liquid and the values are difficult to determine.^14(*) A private company is the one whose ownership is private. That is, a business company owned either by non-governmental organizations or by a relatively small number.

I.2.1.2 Public Companies

It is a company that has issued securities through an initial public offering (IPO) and that is traded on at least one stock exchange or in the over the count market^15(*). Although a small percentage of shares may be initially »floated» to the public, in becoming a public company, a company is allowed to determine the value of the whole company through daily trading^16(*).

It is advantageous because it has ability of selling future equity stakes and increasing access to debts markets. Due to these advantages, there is regular scrutiny and less control for majority owners and company founders^17(*). The other advantage is that they are able to raise funds and capital through the sale whether be in the primary or secondary market of their securities, whether debt or equity.

I.2.2.Types of companies

Companies are classified in different forms basing on the way they are registered.. Abusiness may be set up as a sole trader(self-employed person), as a partnership or as a limited liability. Each has its own characteristics, advantages and disadvantages. Here below there is a list of different types of companies.

* ¹² X, «Liquidation», m.businessdictionary.com/definition/liquidation.html/ last accessed 15/05/2014

* ¹³ LawN°07/2009 of /2009 relating to companies, article 5.

* ¹⁴ L. Jacoline et al./,Attract Investors to your Business, John Wiley and Sons ,2008, p 200.

* ¹⁵ G.F. Davis, Re-imaging the corporation, Ross School of Business, University of Michigan, www.investopedia.com/terms/p/publiccompany.asp/ last accessed 6/5/2014

* ¹⁶ Ibid

* ¹⁷G.F. Davis, op.cit.,p. 150.