Corporate Law Made Easy - Volume 2

Module E

Atif Abidi

www.canotes.net

Corporate Laws Made Easy Volume - II

Advanced areas of Companies Ordinance

Rules

Other Laws

Corporate Laws Made Easy Preface

PREFACE

The Examinations of ICAP are a demanding test of students ability to master the wide range of knowledge and skills required of the modern professionals. Subject of Corporate Laws is one of the efforts made by ICAP in this context for enhancing students knowledge about detailed overview of corporate and other laws & rules prevailing in Pakistan.

The best and most recommended source for this subject are the Bare Laws such as Companies Ordinance 1984, Miscellaneous Rules, Regulations, Codes and Sundry Laws. The basic problems faced by the students in this subject is the selection of source as the bare laws are sometimes too difficult to understand or too lengthy to digest & revise at final prep for the ICAP Exam.

For these reasons there arise needs to have some comprehensive and easy notes for this subject. For this purpose these notes are being prepared using different sources but importantly emphasizing on the original sources. Following sources are being used in compiling these notes

Companies Ordinance 1984 (Volume 1) Other Rules, Laws & Regulations ATFL (Vol 1 & 2) Notes made by Sir Muammad Asif (SKANS) Notes made by self Notes of Sir Kashif Adeel

Now Volume 1 and Volume 2 of these notes contains all course contents of Corporate Laws.

How To use:

It is strongly recommended that first of all you should thoroughly read from the original ordinances, rules etc. Then you may develop your own notes / short points to have the course contents in your grip and also its good for revision purposes. You may either consult these notes as guideline for preparation of your own notes or you may select these notes for your revision, Its totally upto you.

Syllabus outline by ICAP is the most important thing to ensure completeness which unfortunately is being ignored by most of the students, hence loosing the grip on the complete course. Therefore the syllabus outline is provided in these notes as table of contents and all topics are cross referred with that outline.

I have tried to ensure completeness in these notes and where not completed, have referred towards the best sources available for that data. However human error is expected so if you find anything missing or some spell / logical mistakes in these notes please mail me about such errors by referring to page no. at my mail id [email protected]. In most cases fines & penalties are not incorporated in these notes

I am especially thankful to my friends for effective coordination in making of these notes

Hope these notes could serve you.

May ALLAH bless all of you with success in every exam of both lives.

Please also pray for me Thanks

Syed Atif Hassan Abidi Oct 23, 2012

For notes & other study material for module E visit

www.canotes.net

Corporate Laws Made Easy ICAP Syllabus Outline

ICAP Syllabus Outline Page #

MODULE E PAPER E 16: CORPORATE LAWS (100 marks)

INTRODUCTION

The syllabus aims to provide the knowledge and understanding of corporate and other relevant laws, rules and regulations and to familiarize with the secretarial practices including the knowledge of handling various matters usually expected to be performed by the secretary of a corporate entity. Case studies / scenario based questions in addition to descriptive Questions will be set in the examination.

The examinees are expected to possess detailed knowledge of the Companies Ordinance 1984 over and above what they have learnt at the Intermediate stage. Topics examined at the Intermediate stage may or may not be directly re-examined here, however, examinees would need to utilize knowledge and skills learnt earlier. The knowledge required for Companies Rules would also be comprehensive but for other Laws and regulations only general knowledge would suffice.

INDICATIVE GRID SYLLABUS CONTENT AREA WEIGHTAGE

1. Practical aspects in respect of areas of the Companies Ordinance, 1984 covered at Module D examination in Company Law paper. 2. Companies Ordinance, 1984 from section 261 onwards. Second schedule 40 3. Various Rules under the Companies Ordinance 30 4. Secretarial Practices 15 5. Other laws and regulations 15 TOTAL 100

Note: The weightages given above are for guidance purposes only and deviations in setting of papers may be expected.

CONTENTS:

1. Areas of the Companies Ordinance, 1984 covered at Module D Examination in Company Law Paper.

In the Corporate Laws paper at Final level, students are to have a more in-depth knowledge and understanding of those parts of the Companies Ordinance, 1984 which were covered in the Company Law paper at Module D, however, the emphasis of testing at the Final Examination level would be application of those provisions from a practical viewpoint. Testing would focus on the level of understanding of those provisions and their application.

2. Other specialized areas of the Companies Ordinance, 1984.

a. Part VIII Investigation and related matters.

b. Part VIII A Non Banking Finance Companies (NBFC) Provisions as to Establishment and Regulation of NBFC

c. Part IX Arbitration, arrangements and reconstruction.

(N-1) iv

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3

5


d. Part X Prevention of oppression and mismanagement.

e. Part XI Winding-up

i) Modes of winding-up, and provisions relating to contributories (sections 297 and 306)

ii) Winding-up by court; provisions relating to the following: - Cases in which companies may be wound-up by the court (section 305 and 306). - Petition for winding-up (section 309 and 310). - Commencement of winding-up by the Court (Section 311). - Official liquidators (section 321 to 331, 333 and 334, 336 and 337, 339 to 341 and 346 to 350). - Enforcement of court orders (section 355 to 357) * For section 328 and 329, students are only required to be familiar with the contents of statement of affairs to be made to official liquidator and report by official liquidator.

iii) Voluntary winding-up (Sections 358 to 401)

iv) Provisions applicable to every mode of winding-up - Status of companies being wound-up (section 402) - Proof and ranking of claims (Section 403 to 407) - Supplementary provisions as to winding-up (Section 421, 422 and 431 to 434)

f. Part XIII Winding-up of unregistered companies

g. Part XIV Companies established outside Pakistan (Section 450 to 462)

h. Part XV Registration offices and fees (section 468 and 469)

i. Part XVI General legal proceedings, offences etc. (Section 494 and 496)

Second Schedule - Salient features of disclosure requirements for prospectus or statement in lieu of prospectus and understanding of the reports and certificates to be included in the prospectus.

3. Various Rules under the Companies Ordinance

a. Explanatory provisions only of Companies Rules 1985; knowledge of the contents of the Forms is not expected.

b. Capital Issues The rules for issue of capital by companies, premium on shares, issue of shares for consideration other than cash and related aspects, covered by the Companies (Issue of Capital) Rules, 1996 and Stock Exchange Rules.

c. Companies (Appointment of Legal Advisors) Rules, 1975.

d. Companies (Buy-back of Shares) Rules, 1999.

e. Companies' Share Capital (Variation in Rights and Privileges) Rules, 2000.

f. Non-Banking Finance Companies (Establishment and Regulations) Rules, 2003 (1 10) Non-Banking Finance Companies and Notified Entities Regulations, 2008 - Regulation 25 - Schedule IX (Fit and Proper Criteria) - Schedule X (Long, Medium and Short Term Financing Facilities)

4. Secretarial practices

Floatation of shares and securities including prospectus, offer for sale and convertible securities, stock exchange listing rules, underwriting, brokerage, etc.; and discount and premium on shares; application

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and allotment of shares, issue of share certificates and bonus and right shares and transfer and transmission of shares of companies, investigation and dividend. a) Filing requirements, maintenance of statutory books and registers under the Companies Ordinance, 1984. b) Meetings of shareholders and directors and all proceedings thereto, including notices, agenda, quorum, voting, poll, proxies, resolutions and minutes. c) Functions and responsibilities of the Securities and Exchange Commission of Pakistan under the SECP Act (Act No. XLII of 1997).

5. Other laws and regulations

a) Foreign Exchange Regulations Foreign Exchange Manual 8th Edition i) Chapter XIX Loans, overdrafts and guarantees

Part A: Rupee loans Foreign exchange regulations relating to definition of foreign controlled companies, provisions for general permission for lending to foreign controlled companies for working capital, local borrowings by foreign controlled companies for capital expenditure.

Part B: Foreign private loans Private foreign currency loans, repatriable foreign currency loans by foreign controlled companies for meeting working capital requirements, foreign currency loans (repatriable and nonrepatriable basis) by Pakistani firms and companies functioning in Pakistan.

ii) Chapter XX Securities

Knowledge and application of provisions relating to rules and regulations governing acquisition and holding of foreign securities, issue, transfer and export of Pakistani securities to non-residents, general exemption from the restriction on transfer and issue of Pakistani securities to non-residents, procedure for issue of shares to non-residents, trading of quoted shares by non-residents, and special instructions regarding shares transferred under the Central Depository System CDS of the Central Depository Company.

b) Stock Exchange Listing Rules and Guidelines especially those relating to secretarial matters, public issue of shares, Code of Corporate Governance and Transfer Pricing.

Laws governing certain specialized institutions

c) Banking Companies Ordinance, 1962 Sections pertaining to audit and accounts, mainly sections 34 to 38 of the Banking Companies Ordinance, 1962.

d) The Central Depositories Act, 1997 and Central Depository Companies (Establishment and Regulation) Rules 1996 Understanding of provisions relating to - Central Depository System; and - Effect of the Central Depository on provisions of the Companies Ordinance, 1984 relating to interalia, sending of notices to members, registration of transfers, payment of dividend, maintenance of register of members, issue of bonus and right shares and effect on the rights of members.

e) Modaraba Companies and Modarabas (Floatation and Control) Ordinance, 1980. Provisions relating to the following: - Definitions (Section 2) - Registration of Modaraba Companies (Section 4 to 6) - Provisions applicable to Modaraba (Section 7 to 23,33,37,41 and 42) Modaraba Companies and Modaraba rules, 1981 - Rules 2 to 4,7 to 13,16 to 20-B,23 and 25 to 28 - First Schedule (Form no.1,9 and 11 including annexures) - Third Schedule - Fourth Schedule (salient features of matter to be specified in prospectus and reports to be set out

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therein)

f) The Insurance Ordinance, 2000 provisions relating to statutory and special audits and maintenance of accounts, mainly sections 45 to 49, 51 and 52 and the Securities and Exchange Commission (Insurance) Rules 2002 including regulations and Format accounts. Broad understanding of the Code of Corporate Governance for listed and unlisted insurance companies.

g) The Securities and Exchange Ordinance 1969 and the Securities and Exchange Rules, 1971 provisions pertaining to issuance of shares and securities to the general public (mainly section 9 ) and Insider Trading.

h) 1. Competition Ordinance 2007 (Chapter I,II,IV,V), 2. COMPETITION ( MERGER CONTROL) REGULATIONS 2007 Excluding The SCHEDULE., 3. COMPETITION ( Leniency) REGULATIONS 2007

i) Listed Companies (Substantial Acquisition of Voting Shares and Takeover) ordinance, 2002. and Listed Companies (Substantial Acquisition of voting shares and Takeovers) Regulations , 2008

j) Rules and regulations framed by the Federal Government from time to time, as may be specifically notified by the Institute of Chartered Accountants of Pakistan for inclusion in the syllabus.

Note: Where specific reference to an Act, Ordinance, Rules, Regulations, Guidelines or SRO gazette notification is given it is to be assumed that it covers any subsequent amendments that may be made therein from time to time.

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Notes:

N-1. Areas of the Companies Ordinance, 1984 covered at Module D Exam in Company Law Paper.

Users of these notes are requested to consult Volume 1 for the updated notes for this area. Those notes contain all sections, sub-sections, clauses etc of Companies Ordinance cross linked with Rules and SECP circulars

N-2. Secretarial Practices

This portion involves Practical application of Management & Administration portion of Module D course. Following sources are very helpful for preparation of this portion

Corporate Laws made easy - Volume 1 (Cross Linked Circulars) Chapters of Meetings & Administration in ATFL. (Vol 1) Format of Notice, MOA, AOA, Proxy Form, Special Resolution etc ICAP Past Papers

N-3. Competition Ordinance

This portion has been taken from Notes of Sir Kashif Adeel available at www.financedoctors.net In these notes Sir Kashif Adeel have covered Competition Ordinance along with Merger Control & Leniency Regulations incorporated as & where necessary. We are really thankful to him for such a nice contribution.

Portion of Syllabus Outline Completeness (Tried to be) ensured in these notes

1.Module D 100% Completeness as per Companies Ordinance 1984 2.Ordinance 261 onward Maximum as near to original, nearly up to 95% covered 3.Rules 100% Completeness from original sources 5.Other Laws Completed to the extent of notes

(except Code of Corp Governance i.e. 100% covered in these notes)

Corporate Laws Made Easy ~ 1 ~ Specialised areas of Companies Ordinance 1984

Investigation and Related matters (SEC 263 to 282) Investigation of affairs of company:

SECP may appoint inspectors to investigate and report on affairs of company on: Application of Members or Shareholders having 1/10th voting securities. Application of persons comprising 1/10th in number of the persons entered in register of members [Co

not having Share Capital] Application of Registrar if he called for information or explanation and it was not given or was

unsatisfactory. Order of court Resolution of company in general meeting. Discretion of SECP, if there are circumstances suggesting that:

Business is conducted to defraud Creditors, Members or any other person or Oppressive to members or purpose is fraudulent/ unlawful.

Person in management are guilty of Breach of Trust, Misfeasance or Misconduct. Members are deprived of reasonable return. Members are not given reasonable information. Shares are allotted for inadequate consideration. Business is not managed on sound principles/prudent practices. Financial position is indicating insolvency.

Application must be supported by Evidence showing good reason for investigation. SECP may require any security for cost of investigation. Commission shall give a show cause notice to company.

Power of Inspector

Inspector to be Court for following purposes: Enforcing attendance of persons and examining them. Compelling discovery & production of books and papers. Issuing commissions for examination of witness.

If Inspector thinks necessary, he can also investigate (after approval of Commission) the affairs of: Any body corporate which is (or at any relevant date has been) companys associated

company as Subsidiary, Holding, Subsidiary of holding or Holding of subsidiary. Any body corporate which is or was managed by a Chief Executive who is or was also Chief

Executive of the company. Any person who is Chief executive, Managing agent or an associate of Chief executive or

managing agent.

Inspectors Report

Inspector may (or on direction of SECP shall) make interim reports and on conclusion of investigation shall make final report to SECP

Such report shall be typed or printed as SECP may direct SECP shall forward a copy of inspectors report to:

Registered office of the Co. with directions of SECP Members at their request [who applied for investigation] Court [if applied by court]

SECP may forward a copy, on request of and on payment of prescribed fee to: Members/ Body corporate/ Persons interested in affairs of Company Persons whose interest as creditor appears to be affected

SECP may send copy to registrar which such directions as think fit. SECP may get report/any part published itself or may direct Company to do so. Copy of report shall be admissible in any legal proceedings as evidence of opinion of inspector.


Court Orders

If reasons proved after investigation Commission may apply to Court and Court may:

1. Remove any Director, Chief Executive, Managing agent or other officer.

No compensation for loss of office If Directors removed [casual vacancy filled in accordance with the provisions of AOA] If CE removed [Directors shall elect another person as CE] If all directors including CE removed [General Meeting for election of directors be called] Directors etc. so removed will be ineligible for such post for 5 years or such lesser period as

directed by the Court

2. Direct Directors to carry out changes in management and in accounting policies. 3. Direct any existing contract, which is to the detriment of the Co., to be annulled or modified.

No compensation payable on modification or annulment of contracts 4. Direct company to call a meeting of members to take remedial actions on specified matters.

Proceedings for recovery of damages & property SECP can proceed for recovery of

Damages [in case of fraud, breach of trust, misconduct] Property [which has been misapplied or wrongfully retained]

Expenses of Investigation:

Firstly paid by Commission and subsequently reimbursed from Persons convicted of prosecution or persons who have applied for investigation.

Imposition of restriction on shares & debentures and prohibition on transfer:

If SECP think fit, for finding out relevant facts about any shares, it may impose following restrictions

Transfer of shares void Not be issued No voting rights No further shares issue in right of those shares No payment from Company to anyone for sum due No change in directors, CE, Managing agent unless by operation of law.

Enquiries and investigation against Company shall not be effected by Resolution passed by Company for winding up Petition submitted by court for winding up Civil/Criminal proceedings initiated against Company/Officers


NON BANKING FINANCE COMPANIES (sec 282 A N) Section 282-(A) [Application of this Part]

1. An NBFC, which includes companies licensed by SECP to carry out any one or more of the following forms of the business:

a) Investment Finance Services b) Leasing c) Housing Finance Service d) Venture Capital Investment e) Discounting Services f) Investment Advisory Services g) Asset Management Services h) Such other companies as the Federal Government may notify for this purpose.

2. Notified Entities (NE) which include such other company or class of companies or corporate body or trust or any other entity or person as the Federal Government may, by notification in the official Gazette specify for the purpose

Section 282-(B) [Powers to make rules] Federal Government & SECP may make rules for establishment and regulation of NBFCs & NEs;

Section 282-(C) [Incorporation of NBFC] 1) NBFC shall not be incorporated without prior approval by the SECP. 2) NBFC shall not carry on any business unless it holds a license from SECP for that business. 3) Existing companies in any one or more forms of businesses mentioned in 282A shall before expiry of 6

months from coming into force of this clause and every other company before commencing so shall apply in writing to the SECP for grant of a license

4) NBFC shall not commence business unless has minimum prescribed capital for each form of business.

Section 282-(CA) [Registration of Notified Entities (NE)] NEs shall not operate without prior registration with the SECP. SECP may register the NE on terms and conditions as SECP may deem fit Every NE which is in existence before the commencement of this provision shall within a period of 6

months apply in writing to the SECP for registration

Section 282-(D) [Power to issue Directions] The SECP may issue directions (that NBFC/NE bound to follow) from time to time where it is satisfied to do so

in the public interest to prevent the affaires of NBFC being conducted in a manner detrimental to the interest of shareholders

or the persons having interest in the NBFC to secure proper management of NBFC by rectifying situations

Section 282-(E) [Powers to remove] Where SECP satisfied that Association of any chairman, director, chief executive or any other officer of the NBFC/NE is detrimental to interest of NBFC/NE, its shareholders or the person interested, the SECP by make an order remove such person from their office after giving an opportunity of being heard.

Where delay in opinion of SECP be detrimental to shareholders interest, SECP may, at time of representation on opportunity of being heard, direct such person not to hold such office or be concerned with management of NBFC/NE

Vacancy filled by person appointed by SECP till election in general/Board meeting Person so removed shall not take part in management for term not exceeding 3 years

Section 282-(F) [Power to supersede BOD] Where the SECP satisfied that Association of BOD of NBFC/NE is detrimental to interest of NBFC/NE, it may supersede the BOD for such period as it may specify

Section 282-(H) [Special Audit] SECP shall monitor the general financial conditions of NBFC/NE and may order for special audit to carry out detail scrutiny of affairs of NBFC/NE. On receipt of special audit orders, NBFC/NE may be directed to do/ abstain certain acts

Section 282-(I) [Inquiry by Commission] SECP may call an inquiry or inspection by persons appointed by it. The inquiry officer may call any information inspect and cease books of account and documents of NBFC. All the directors, managers, officers and related


persons shall furnish necessary information to the inquiry officer.

Section 282-(J) [Penalty for failure, refusal to comply with provisions] Fine not more than 50,000,000 to NBFC/NE or officers including auditors All directors/managers/officers liable unless proved not being part of guilty Cancellation of license (all/any form of business) after giving opportunity of being heard. On cancellation of license functions of NBFC/NE shall cease & SECP may move court for winding up. If NBFC/NE continues after suspension every responsible directors /managers /officers liable for Fine =

50 million (Per day fine = 200,000) If officers/auditor fails to deposit penalty up to 6 months, SECP may in writing disqualify him for any

office in NBFC or any Company for such period as may be specified

Section 282-(K) [Penalty for making false statements] Penalty for making false statement or using position for getting benefit for himself/relative, Fine not

exceeding 100,000 or Imprisonment not exceeding 3 years; or both If officer/director/CE of NBFC/NE controlled/owned by Federal/Provincial Govt. extends loan to anyone

on verbal instructions (not in writing) of holder of public office without drawing attention of his senior/BOD shall be liable for imprisonment that may extend to 1 year or fine or both, in addition to other actions taken against him in accordance with law

If any company not being NBFC/NE, or any NBFC/NE whose registration has been cancelled, transacts business specified in 282-A ; Its CE, every director, manager & other officer and every member of association or body of individuals, be punishable with imprisonment for term which may extend to 7 years & fine not exceeding 1 million and shall be ordered by the Court to pay the fine within a time fixed by Court (or in default to suffer further imprisonment 5 years)

Section 282-(L) [Procedure for amalgamation of NBFC] NBFCs may be amalgamated with each other provided a scheme containing the terms of such

amalgamation has been placed in draft before shareholders of each NBFC separately and it is approved by a resolution passed by a majority of 2/3.

Notice of general meeting be given to each shareholder & also be published at least once a week for 3 consecutive weeks in not less than 2 newspapers of localities of registered offices of NBFCs (1 shall be in understandable language of that locality/localities).

Any share holder who has voted against the scheme and descend from the scheme of amalgamation shall be entitled to claim from NBFC in respect the shares held by him and the decision of SECP on the value of shares shall be final for all purposes.

Once the scheme for amalgamation is approved by the requisite majority of shareholders, it shall be submitted to the SECP for sanction. After the scheme being sanctioned by SECP It shall become binding on the concerned NBFC and all their shareholders. Remaining/surviving entity shall transmit a copy of the sanctioning order of the SECP to the

registrar concerned, who shall on receipt of sanction order strike off the name NBFC which has been amalgamated and it will cease to function.

The property and liability of the amalgamated NBFC shall be transferred to and vest in resulting/surviving entity.

Section 282-(M) [Punishment or adjudication of fine or penalty] Where a penalty or fine is provided for any offence, contravention or default in complying with, any

provision of Section 282, the same shall be adjudged and imposed by the SECP. Provided that fine or penalty shall only be imposed after giving an opportunity to show cause and if he so requests, after giving him an opportunity of being heard personally (or through such person as may be prescribed in this behalf.)

No Court shall take cognizance of any offence punishable u/s 282 K except on complaint in writing made by an officer of SECP generally or specially authorized in writing in this behalf by the SECP and no Court other than the High Court shall try such offence.

Section 282-(N) [Rehabilitation of NBFCs and NEs] SECP shall have the same powers as are exercisable by the Federal Government u/s 296 for rehabilitation

of a NBFC/NE which is facing financial or operational problems. Where SECP declares a NBFC/NE as sick, the SECP may, in addition to powers u/s 296 -

Make application to the Court u/s 412 or 413 and u/s 408 & 409 and provisions of these sections shall apply mutatis mutandis in all respects

Failure to give effect, or implementing rehabilitation plan approved by SECP Fine not exceeding 10 million rupees (Per day Rs 10,000)


Arbitration, Arrangements and Reconstruction (SEC 283 to 289) Compromise is an agreement terminating disputes between parties. Arrangement involves reorganization of capital by consolidation or division of shares of different class.

Power of companies to refer matters to Arbitration: Company may refer matter to arbitration by:

By Written agreement According to Arbitration Act 1940 On existing or future difference between itself and other company or person

Parties to arbitration may delegate to arbitrator powers to settle any term or determine any matter capable of being lawfully settled.

Power to make compromise or arrangements with Creditors/Members:

When Compromise or Arrangement is proposed between Company and Creditors or Members: 1. Court shall, on application, order a meeting of creditors or members to be conducted. 2. If a majority in number representing 3/4th in value of creditors or members approves it, it will be binding

on all Creditors/Members 3. Court shall make an order sanctioning Compromise/Arrangement provided

Court is satisfied that all material facts have been disclosed Company would file Copy of order to Registrar within 30 days Copy of order shall be annexed to every MOA and AOA issued after it.

Court may at any time Stay commencement of any suit/ proceedings against the Company Give such directions or make such modification as think fit by it.

If court is satisfied that Compromise/Arrangement cannot work satisfactory, it may (self or on application by registrar/interested person) make an order of winding up.

Information as to compromise or arrangement with Creditors/Members: Where a meeting of Creditors/Members is called, every notice shall accompany a statement showing:

Terms of compromise/arrangement explaining its effect. Material interest of Directors (including C.E.) as Directors or Members or Creditors. Effect of Compromise/Arrangement on these interests so far as different from like interests of other

persons.

If a notice is given by advertisement, it shall either Accompany such statement or Mention the place where statement could be obtained by Creditors/Members free of charge.

Same information required for Trustees of any deed securing issue of debentures, if compromise affects rights of Debenture holders.

Every director, CE, Managing agent, Trustee for debenture holders shall give to Company Notice of such matters related to himself necessary for compromise or arrangement Such further info as requested by Company

Provision for facilitating Reconstruction and Amalgamation:

If an application of Compromise/Arrangement proposes a Reconstruction/Amalgamation, Court may make provisions relating to all or any of following matters:


1. Transfer to the transferee company of whole or part of undertaking, properties and liabilities. 2. The allotment/appropriation of any shares/debentures or other interest by the transferee company. 3. Continuation by or against the transferee company of any legal proceedings. 4. Dissolution, without winding up, of the transferor company. 5. Provisions regarding any person dissenting from scheme or contract. 6. Other matters.

After the order of transfer, all properties and liabilities stand transferred and removed from charge, if the order contains so. Certified copy is filed with registrar within 30 days.

Power and Duty to acquire shares of members dissenting from scheme or contract:

If a scheme of transfer of shares is approved by 9/10th shareholders (holders of shares whose transfer is involved, other than shares already held by transferee Company at date of offer) within 120 days of offer from Transferee Company:

Transferee company may give notice to dissenting members within 60 days of its intention to acquire their shares and

Company will be bound then to acquire shares on same terms and conditions, as given in scheme for transfer of shares, of approving shareholders.

Dissenting shareholders may apply to court within 30 days of notice. If court thinks fit, it may direct otherwise. If court rejects application

a. Order of rejection is to be filed by Transferee Company to Transferor Company b. Within 30 days (of notice or order whichever is later) c. Price payable (kept in a separate account in a Schedule bank) will be handed over to transferor

company d. Instrument of transfer also filed to transferor Company, executed on behalf of shareholders by

any person appointed by trustee e. Transferee Co shall

Register Transferor Company as holder of those shares Within 30 days of registration inform dissenting share holders of the fact & receipt

of amount payable to them

Where Transferee Company already holds more than 1/10th shares, above provisions would not apply unless: Every holder of Transferor Company is offered the same terms. And The holders, who approve the scheme, shall be 3/4th in majority having 9/10th remaining shares.

When Transferee Company becomes holder of 9/10th shares in cumulative: It will give notice to remaining shareholders. Remaining shareholders may within 90 days of notice require Transferee Company to acquire their

shares.

Provisions relating to offer or circular containing offer

Each such offer or recommendation by directors of transferor to accept shall Contain such info as may be prescribed Contain statement by transferee company ensuring that steps taken for availability of cash Presented to registrar for registration

o Registrar may refuse to register if info not provided Appeal against orders of registrar can be filed to SECP


Oppression, Mismanagement and Rehabilitation (SEC 290 to 296)

P revention of O ppressionP revention of O ppressionP revention of O ppressionP revention of O ppression

Who can apply:

1. Member(s) having 20% or more Issued share capital or 2. Creditors having interest equivalent to 20% or more Paid up capital or 3. Registrar, if affairs conducted/will be conducted in an Unlawful, Ultravires MOA, Oppressive or

Prejudicial manner

Order of Court:

If Court is of the opinion, on any such petition that Co affairs conducted in a manner aforesaid To wind up Co would unfairly prejudice Co/members

Court may order: 1. Regulating Companys affairs in future 2. Purchase of shares of any members of Co or by other member of the co or by co itself.

If purchase by co, reduction accordingly of companys capital. Where any order makes any alteration in companys MOA/AOA

It is as valid as if duly made by Special Resolution of co Copy of order to be filed with Registrar within 14 days.

Power of Court:

1. Court may terminate or modify any agreement between co and any Director including Chief Executive, Managing Agent or Other officer on terms and conditions as may in the opinion of court are just & equitable.

2. Court may set aside any transfer/delivery of goods, payment execution or other transaction within 3 months before application, which is deemed in his solvency to be a fraudulent preference.

3. Court may decide any other matter including change in management. 4. Court may on application of any party to the proceedings make interim orders

[Any claim for damages against co would be inadmissible.]

M anagem ent by A dM anagem ent by A dM anagem ent by A dM anagem ent by A d m inistratorm inistratorm inistratorm inistrator

Representation to the SECP

If any time creditors having interest of amount not less than 60% of paid up capital represents to SECP that:

1. Companys members/creditors/directors/person connected with management of company is guilty of Breach of Trust, Misfeasance or Misconduct.

2. Affairs are conducted in Unlawful, fraudulent, Oppressive, and prejudicial manner. 3. Members are deprived of reasonable return.

No adequate dividend for consecutive 3 years 4. Industrial project or unit to be set up or belonging to company is not completed, commenced or

smoothly operated such that: i. Market value or net worth of share has fallen below 75% of Par value. ii. Debt/Equity ration has fallen beyond 9:1. iii. Current ration fallen beyond 0.5:1

5. Industrial unit owned by company is not in operation for 2 years. 6. Accumulated losses exceed 60% of paid up capital.

SECP may appoint an Administrator within 60 days of receipt of representation to manage the affairs of company on specified terms Administrator may be appointed from

Panel maintained by SECP Other person by giving notice to SBP if that person is not on panel


Provisions relating to Administrator

Receive such remuneration as SECP may determine On appointment management of companys affairs vest in him shall exercise all powers of

director/management Director/management shall cease

He can cancel any purchase/sale agency contracts which is patently to benefit any director or person related with management

He is not liable to compensate or pay damages for Loss of office Termination of contract

After purpose of appointment fulfills, SECP may permit the company to appoint directors and Administrator shall cease to hold office.

No suit can be filed against Administrator for acts done in good faith in pursuance of these rules. SECP may issue such directions to Administrator as it deems desirable and he may apply to SECP any

time for instructions about different matters. Any person aggrieved by orders of SECP or Administrator (termination of contract) may appeal to

Federal Govt. within 60 days of order. Any order or decision of SECP under this section shall be final and shall not be called in question in

any court Provisions of this section shall apply notwithstanding anything contained in MOA, AOA & Companies

Ordinance 1984.

R ehabiliR ehabiliR ehabiliR ehabilitation of sick units by F ederal G ovt. tation of sick units by F ederal G ovt. tation of sick units by F ederal G ovt. tation of sick units by F ederal G ovt.

Provisions apply to Industrial unit owing by company facing financial/operational problems, declared sick by Federal Govt.

After declaration as such, any institution, authority, committee or person authorized by Federal Govt., may draw a Rehabilitation Plan which may include any or all of the following provisions

a) Reconstruction, Compromise or Amalgamation. b) Alteration of share capital and variation of rights c) Alteration of loan structure, rescheduling and conversion into share capital carrying special rights. d) Acquisition/transfer of shares of sponsors/persons managing affairs of company. e) Issue further share capital including shares containing special rights f) Removal and appointment of Directors including CE or other officer g) Amendments, modification & cancellation of existing contracts

Without any compensation. h) Alteration of MOA, AOA or change in Accounting Policies.

Plan shall be submitted to Federal Govt. for approval. After approval, it will be published in Official Gazette. Federal Govt. or any person authorized by Federal Govt. shall supervise Rehabilitation Plan. Copy of plan sent to registrar by Federal Govt. for registration and it should be kept with other documents

of the Company

Provisions shall apply notwithstanding anything contained in MOA, AOA, CO 1984.


Winding up of unregistered Companies (SEC 443 to 449) What is Unregistered Company

Includes any Partnership, Association or Company consisting of more than 7 members. Not includes

A Railway company incorporated by UK or Pakistani Law A company registered under any previous Companies Act or under Co.Ord1984.

Provisions of winding up

No unregistered company shall be wound up voluntary or subject to supervision of court [Only By Court.]

For determining Court having jurisdiction Company shall be deemed to be registered in Province where its Principal Place of Business is

situated. Principal place of business where proceedings are started, deemed to be registered office of

company. Circumstances of winding up are:

a. If the company is dissolved, or ceased to carry on business or is carrying on business to wind up affairs.

b. If company is unable to pay debt. c. If Court thinks it just and equitable.

Company when deemed unable to pay debt:

1. A creditor whose Rs. 25,000 or more is due, serves his notice and company within 30 days neither pays nor secures nor compound for satisfaction of creditor.

2. A suit has been instituted against any member for any sum due from the company/member on behalf of company and a notice is served to company and company neither pays nor secures within 15 days.

3. Execution issued on a decree obtained in favor of creditor and it returned unsatisfied in whole or in part. 4. If it is proved to the satisfaction of Court

Court shall take into account Prospective and Contingent Liabilities

Contributories:

All those liable to contribute for payment of liability, expense of winding up and adjustment of rights among themselves.

If he dies/gets solvent, his heirs/assignees shall be contributories.

Miscellaneous Provisions

Companies established outside Pakistan would be wound up as an unregistered company Provisions of this ordinance with respect to staying and restraining suits and legal proceedings between

petition for winding up and order for winding up shall extend to suits & proceedings against any contributory

No suit/proceedings can be continued/started against unregistered company being wound up against any contributory of company

Except by leave of court Court & Official liquidator may exercise any powers on unregistered company being wound up as it is a

company registered under Companys Ordinance 1984 If unregistered company has no power to suit/to be sued in a common name

Court may order all properties, interests, rights & obligations to be vest in Official liquidator Official liquidator may, after giving indemnity as directed by court, bring or defend in his

official name any suit/proceedings


Companies established outside Pakistan (sec 450 to 462) Documents to be delivered to Registrar Every foreign Company incorporated outside Pakistan having a Place of business in Pakistan within 30 days of Establishment or Change of place in Pakistan shall deliver following documents to registrar:

Certified copy of charter, statue, MOA & AOA or other instrument defining constitution in English/Urdu(or translation in English/Urdu)

Full address of Registered Office or Principal Office in the country of incorporation List of directors, chief executive and secretaries with detailed particulars. Return showing complete particulars of Principal Officer in Pakistan.

[Name (sur,former,father,husband), nationality(present,former), designation & addresses] Complete particulars of Persons authorized to receive notices etc. together with his consent. Full address of office in Pakistan, deemed to be Principal Office in Pakistan. Return containing particulars of change, where any change in above info / docs, within 30 days of

change

Documents to be given every year: 1. Prescribed no. of copies, not less than 3, of audited B/S and P&L with such particulars as are

required to be filed by a company registered in Pakistan. 2. List of Pakistani members and Debenture holders.

Within earlier of 45 days of date of submission to the public authority of country of incorporation, or Within 6 months of the date up to which accounts are prepared

Certain obligation of Foreign Companies: Maintain at Principal Officer a register of Pakistani members and debenture holders which shall be

open to inspection. In prospectus, inviting share or debenture, state country of incorporation. For issue of Prospectus authorization of Federal Govt. is must. State the name of Co, country of incorporation, outside every office in English/Urdu Mention liability, if limited, on each prospectus, advertisement & outside every place of business in

English, Urdu and vernacular language. Also state above particulars on every document.

Service of document on company Deemed to be sufficiently served

a) By giving to person authorized in this behalf. b) By leaving or posting to place of business where

i. Address of authorized person not provided ii. Authorized person is dead, ceased to reside at provided address or refused to

accept the documents on Companys behalf.

Miscellaneous provisions: If Co fails to comply requirements It shall have no effect on validity of any contract, dealing or transaction entered into by the Company

and liability to be sued Company can not bring any suit, claim, set-off, counter claim unless all requirements met.

Provisions of Companies Ordinance 1984 relating to name, power of registrar for investigation/inspection shall apply to this Company.

Where Company intends to cease having place in Pakistan it shall 30 days before ceasing to have place of business

Intimate to Registrar. Publish notice of such intention at least in 2 newspapers.

[Obligation of Company to deliver documents shall also cease] Restriction of going house to house for sale of securities (except offices)


Registration offices and fees( SEC 468, 469) Registrar not to accept defective documents (SEC 468)

If in the opinion of the registrar, any document required or authorized by or under this Ordinance to be filed or registered with the registrar-

contains any matter contrary to law, or does not otherwise comply with the requirements of law; is not complete owing to any defect, error or omission; is insufficiently legible or is written upon paper which is not durable; or is not properly authenticated;

The registrar may either require the company to file a revised document on specified form & within specified time Refuse to accept or register the same.

Where the registrar refuses to accept any document for any of the reasons aforesaid The same shall not be deemed to have been delivered to him in accordance with the provisions of this

Ordinance unless revised document provided in specified time. The registrar shall communicate his decision in writing to the company.

If registration of any document is refused, the company may either Supply the deficiency and remove the defect pointed out or, within thirty days of the order of refusal, prefer an appeal to

Registrar, where the order of refusal has been passed by an additional registrar, a joint registrar, a deputy registrar or an assistant registrar

SECP, where the order has been passed, or upheld in appeal, by the registrar

An order of the SECP shall be final and shall not be called in question before any Court

Acceptance of documents presented after prescribed time (SEC 469.) Where any document required or authorized by or under Companys Ordinance to be filed or registered with the registrar within a specified period is presented after the expiry of such period, the registrar may accept same

on payment by the company or other person concerned of such additional fee as may be prescribed by the Commission, not exceeding 3 times the amount of the specified fee payable in respect thereof

No such document shall be deemed to have been filed with the registrar until the specified has been paid in full.

Acceptance of the document by the registrar shall not absolve the defaulting company or other person concerned of any liability arising from the default, delay in filing or other failure to comply with the requirements of Companies Ordinance.

General Proceedings, offences etc ( SEC 494, 496) Liability of directors for allotment of shares for inadequate Consideration ( SEC 494) Any director, creditor or member of a company may apply to the Court for a declaration that any shares of the company specified in the application have been allotted for inadequate consideration.

Every director of the company who 1. is a party to making the allotment of such shares 2. had knowledge that the consideration so received by the company was inadequate, or 3. failed to take reasonable steps to ascertain whether such consideration was in fact adequate

Shall be liable, jointly and severally with his co-directors, if found by court after full enquiry into circumstances of transactions, to make good to the company the following amount

[Consideration to be received consideration inadequately received]

Penalty for carrying on ultra virus business (SEC 496) If any business or part of business carried on or any transaction made, by a company is ultra vires of the company Every person who acted as a director or officer of the company and is responsible for carrying on such business shall be liable to a fine not exceeding 500,000 rupees and shall also be personally liable for the liabilities and obligations arising out of such business or transaction.


Introduction to winding up (SEC 297 to 304) Meanings & Objectives of Winding up

A proceedings in which all affairs of company are wound up, its rights & liabilities ascertained and the claims of its creditors are paid off out of the proceeds of the assets of the Company including contributions by its members to necessary extent.

Where any surplus assets are left, the same are distributed to members of company in proportion of their rights under AOA

Then company is dissolved in compliance with formalities of Company.Ord.1984

Consequences of winding up

Winding up puts an end to business of company Winding up doesnt means that company s financially embarrassed, even a solvent company may

sometimes wind up in apprehension of future losses

Effects of winding up as regards to different persons are

Company: Company continues to be a corporate entity with all rights. Only Management & Administration passes to Liquidator.

Shareholders: A new statutory liability comes into existence No transfer or change in shareholdings except with approval of Liquidator.

Creditors: They have to lodge claims with Liquidator and Prove debt (except secured creditor). Cannot file or continue suit against company except with leave of court.

Employees Winding up by court appears to be a notice of termination

They an prove claims/damages in respect of wrongful termination Voluntary winding up does not necessary operates as notice of discharge

Directors Directors/ CE and officers cease to hold office except for the purposes of winding up Committee of inspection or creditors in general meeting may sanction continuance

Properties of company No disposition of properties without leave of court

Modes of winding up

Company can be wound up in any of the following modes 1) By court [Compulsory winding up] 2) Voluntary 3) Under supervision of court

C ontributoriesC ontributoriesC ontributoriesC ontributories

Contributory means every person liable to contribute to the assets of a company in the event of its being wound up, and include the holder of any shares which are fully paid up; and persons who are deemed to be contributories or alleged to be a contributory


Liability of contributory accrues on commencement of liability but payable at time specified in calls made on him for enforcing the liability.

Liability of contributories as past and present members

Past and Present members will contribute money to pay all debts, liabilities, expenses of winding up and adjustment of rights of contributories among themselves with following qualification:

No contribution from past member if member ceases to be a member one year before winding up or debt was contracted after he ceased to be a member.

Past member will contribute only if court deems it necessary that present members are unable to pay debt.

For company limited by shares, maximum liability shall be upto amount unpaid on shares. For company limited by guarantee, maximum liability shall be upto amount undertaken by member. For company limited by guarantee having share capital, maximum liability shall be amount unpaid on

shares as well as amount undertaken by member. A sum due to any member in respect of dividend, profit etc. shall not be a debt. Ordinance not applied where liability of individual is restricted and funds of company liable (e.g. policy

of insurance)

Liability of director whose liability is unlimited:

In addition to his liability as ordinary member, such director shall be liable to contribute as if he were a member of unlimited company provided:

If he ceased to be a director one year before winding up or if debt was contracted after he ceased to be a member.

Contribution will be made only if court deems it necessary subject to Articles.

Contributories in case of death, insolvency or winding up of member.

Death: 1. His legal representative will be liable 2. Deceaseds property if default is made by legal representatives in payment of money

Insolvency: 1. His assignee 2. May be proved against the estate of insolvent.

Winding up: 1. Liquidator. 2. May be proved against assets of body corporate.

______________________________________________________________________________________

Note:

ICAP have specifically excluded following sections from course of Corporate Laws, Module E

Winding up by Court [ 307, 308, 312 to 320, 332, 335, 338, 342 to 345, 351 to 354 ]

Provisions applicable to every mode of winding up [ 408 to 420, 423 to 430, 435 to 442 ]

Please refer to ICAP course outline for any change therein.


Winding up by Court (SEC 305 to 357) Petition for winding up

Winding up by Court shall be deemed to commence on presentation of petition for winding up to Court. Following persons may file petition to court subject to certain conditions mentioned

1. Company, after Special resolution Company has to file particulars of assets, liabilities and suits against it

2. Creditors including contingent or prospective creditors Have to give security for costs of winding up

3. Contributories If no. of members reduced below minimum numbers (2 or 7). Shares have been held by him for at-least 6 months during last 18 months.

4. Registrar (with sanction of SECP) 5. SECP, after investigation that

Business of company is Illegal, ultravires MOA or oppressive to members or Management is guilty of fraud or misfeasance or misconduct

Circumstances in which company may be wound up by Court

1. On Special resolution by members of Company 2. Default by company in

a. Holding Statutory meeting b. Holding Statutory report c. Holding any 2 consecutive AGM

3. Number of members fall below minimum number. 4. Company. does not commence business within 1 year of incorporation 5. Company suspends its business for whole year. 6. Company Ceased to be a listed company. if was so 7. Unable to pay debt. 8. If court thinks it just and equitable. 9. Where the business of company is

a. Illegal b. Ultravires Memorandum. c. Oppressive to minority shareholders, promoters and members d. Management is guilty of fraud, misfeasance, or misconduct towards MOA, AOA or Co

Ord.1984.

Minority share holders means shareholders together holding at least 20 % of the share holding

Company when deemed unable to pay its debts.

1. If a creditor of lesser of 50,000 or 1% of Paid Up Capital serves a notice at registered office of company for payment of sum, himself or through agent or legal advisor and within 30 days

Company. neither pays the same Nor secures Nor satisfies creditor by compounding it

2. If court order in favor of creditor and still he remains unsatisfied 3. It is proved to court that company is unable to pay debt

Court shall take into account Contingent and Prospective liabilities


O fficial liquidatorO fficial liquidatorO fficial liquidatorO fficial liquidator

Official Liquidator occupies dual position on winding up He represents company & creditors

He is bound to be impartial, not to make secret profits He is paid agent of company: bound to carry out duties with due care and skills

Appointment of Official Liquidator (OL)

Court shall maintain a panel of persons form amongst persons specified by SECP From this panel 1or more OL or Provisional Manager (PM) shall be appointed Such person with 3 days of communication of order shall inform court of his inability to act so A person other than panel can be appointed if

1. Court considers it. or 2. On application of creditor whom 60% of issued share capital or more is due 3. Notice of fact sent to Registrar.

OL shall forthwith start his duties till conclusion of winding up Where more than 1 person are appointed, court shall declare whether any act shall be done by all or some

or anyone Court shall decide whether any security needed to be given by OL

Resignation, removal & Filling Vacancy:

OL Cant resign before conclusion of winding up o except on personal disability to the satisfaction of court

Can be removed by court any time. Any vacancy in office of OL to be filled by Court,

o Outgoing OL shall continue to act until successor takes his place.

Remuneration of OL

OL is paid remuneration for his services as follows %age of amount realized on disposal of assets

There may be different %age for different class of assets Or Fixed by the Court having regard to amount and nature of work done

In addition to remuneration Court may permit payment of monthly allowance for meeting expenses of winding up for period of 12 months from date of commencement

Subsequently, remuneration can not be enhanced but may be reduced by court anytime If OL resigns, removed or otherwise ceases to hold office before conclusion

He shall not be entitled to any remuneration Remuneration already paid shall be refunded to company

General provisions as to Official Liquidator

Past acts of OL having defects on appointment or qualification are valid till discovery. Winding up procedure shall be completed within 1 year. Extension may be granted by court

For one month at a time, maximum for six months On ground that any proceedings by or against company are pending in a Superior Court.

If OL is convicted of misfeasance, breach or default, he shall cease to hold office Be disqualified for 5 years to hold any other office including that of Director in any company.

A Receiver can not be appointed for assets in the hands of Liquidator except by leave of court.


OL shall maintain proper books to make entries or minutes of proceedings, any other prescribed matters Creditors and contributories can inspect it

OL shall take property of company in custody from any directors etc He may contact dist. Magistrate having jurisdiction over that area

Statement of affairs

When: Within 21 days from the relevant date or time extended by OL, PM, or Court till 45 days. Relevant date for purpose of this statement of affairs means

o where PM or OL is appointed, its date of appointment or o where no such appointment is made, the date of winding up order.

Who: Statement shall be submitted and verified by persons who Were directors, chief executive or secretary at the relevant date Have within 1 year of relevant date

Been Directors, Chief Executive or Officer Taken part in formation of company Been in employment of company and are capable of giving required information Been in employment of a company which is the officer of the company.

Particulars 1) The assets of company stating separately, Cash in hand, Cash at bank and Negotiable securities 2) Debts and liabilities of company 3) The names, addresses and occupation of the creditors of the company stating separately

o Secured debt (with particulars, value and date of security given) o Unsecured debt

4) Names, addresses and occupation of debtors and amount likely to be realized from them. 5) Where property of company is in possession of any other person, name of person and place property. 6) Places where company conducted its business in last 6 months from relevant date and name of

incharges there 7) Detail of pending suits or proceedings in which company is a party 8) Any other prescribed information.

Any Creditor or Contributory can take copy on payment of prescribed fee. OL may reimburse expenses incurred in preparation of report from companys assets.

Expenses may include preparation of affidavit for verification purposes

Report by Official Liquidator

On winding up order as soon as possible, after receipt of Statement of Affairs, not later than 30 days or further 30 days extendable by court shall submit a preliminary report To Court

Such statement shall contain following particulars 1. Capital issued, subscribed and paid up 2. Estimated amount of assets and liabilities giving separately

a. Cash, Bank and negotiable securities b. Debts due from Contributories c. Debts due to company and securities(if any) available against them d. Movable and Immovable properties of company e. Unpaid calls

3. Cause of failure if company has failed 4. Whether in his opinion, further inquiry is desirable to any matter relating to formation, promotion, or

conduct of business


If OL thinks fit, he may make a further report stating Manner in which company was formed or promoted Whether in his opinion any fraud has been committed by any person (director or other officer) in its

formation or promotion since its formation.

Certified copy of report shall also be sent to registrar simultaneously.

Liquidators Account

OL shall present to court an account of his receipts and payments and dealing as liquidator at prescribed times but not less than twice in a year

Account shall be in prescribed form, made in duplicate & verified by declaration Court may have such accounts get audited. 1 copy held with court and other delivered to Registrar along with auditors report Each copy shall be open for inspection by any person on payment of prescribed fees OL shall send it to every creditor and contributory along with auditors report.

Powers of Official Liquidator

OL shall with sanction of court or committee of inspection have following general powers

To institute or defend any suit, action, prosecution or other legal proceedings (civil/criminal) in the name and on behalf of the company

To carry on business necessary for beneficial winding up. To sell movable and immovable property of company by Public auction or private contract. To pay any classes of creditors in full To compromise or make arrangements with creditors having any type of claim against company To compromise all calls, debts, liabilities or claim/damages between company and contributories, debtors

or other persons apprehending liabilities and all questions affecting assets or winding up of company

OL shall have following powers subject to any general/special directions of court or committee of inspection

To execute all deeds and use company seal To prove, rank and claim in bankruptcy/insolvency of any contributory for any balance against his estate

and receive dividends in bankruptcy/insolvency in respect of that balance To accept, make, or endorse bills of exchange To raise on security of assets of company any money requisite To take out in his official name letter of administration to any deceased contributory, do any other act for

payment due from contributory To appoint an agent to do business which he himself can not do To do acts to recover payments due from a contributory To do other acts as are necessary for winding up and distribution of assets

Certain obligations of Official Liquidator

OL shall maintain proper books to make entries, or minutes of proceedings, any other prescribed matters. Creditors and contributories can inspect it.

OL shall take property f company in custody from any directors etc, for which he may contract Dist. Magistrate having jurisdiction over that area

Provisional Manager

At any time after presentation of petition and before Winding up orders, court may appoint a person eligible for appointment as official liquidator.

Court shall give notice to company and provide opportunity to make representation Court may dispense such notice for reasons to be recorded.

PM shall have same powers as official liquidator Court may limit and restrict his powers in appointment or subsequent order.

PM shall cease to hold office when order of winding up being made.


Committee of Inspection

Official liquidator shall within 30 days of orders, summon separate meeting of creditors and contributories of company for determining

Whether COI inspection should be appointed to act with official liquidator Who should be its members

Where Winding up order made on ground that company is unable to pay its debts, it is not necessary for official liquidator to conduct such meeting

If there is a difference between creditors and contributories, court shall decide it

Distribution by official liquidator

Official liquidator shall, subject to directions of court, distribute surplus funds among creditors/contributories within 30 days of receipt.

Surplus funds means funds that come in hands of official liquidator after providing Expenses of Winding up Preferential payments Claims against company which are subject matter of adjudication/assessment.

Amount retained for this purpose shall be invested in Khas deposit certificates that shall be deposited with court and distributions shall be made when claims are settled.

Dissolution of Company

Under following circumstances court shall make an order that the Company be dissolved from date of order and the company shall be dissolved accordingly

o When affairs of company have been completely wound up o When court is of the opinion that official liquidator cannot proceed for winding up for want of

funds and assets. o For any other reason just and reasonable of the case

Dissolution shall not extinguish any right of debt due to company against or from any person. Copy of order shall be forward to registrar within 15 days of making. Registrar shall make a minute of

dissolution of company.

Powers of the Court

Court may fix a time within which creditors are to prove their debts/claims or to be excluded from any distribution made before these debts proved.

Adjust rights of contributories amongst themselves, so distribute any surplus to entitled persons. When assets are insufficient to satisfy the liability, court may make an order of payment out of assets for

costs, charges and Winding up expenses in such order/priority as court may think fit.

At any time after Winding up order require any of ; Contributory, trustee, receiver, banker, agent, officer, employee or auditor of company

to convey, surrender, deliver or transfer to OL any Money, property, books, papers or documents of company in his hands.

Court may at any time after Winding up order, order any contributory to pay any money due from him/estate of person whom he represents to company.

In following cases a contributory can setoff any amount, due to him from company, otherwise than as a member of company

In case of unlimited companies Limited company, where directors liability is unlimited Cases where creditors are paid in full, as regards call made after.


Settlement of List of Contributories

As soon as may be possible after making a winding up order, court shall settle a list of contributories with powers of rectify register of members where necessary and shall cause the assets of the company to be collected and applied in discharge of its liabilities.

In settling list of contributories, court shall distinguish between Person who are contributories in their own rights Person who are contributories as being representative of or liable for debts of others.

Court may dispense with settling list of court where it is not necessary to make calls to adjust right of contributories.

Enforcement of Orders

All orders made by court under companies ordinance may be enforced in same manner in which decree of such court in any suit be enforced.

Such orders for winding up shall be enforceable in any place of Pakistan in the same manner as at place of jurisdiction.

Where any order of court is to be enforced by any other court A certified copy of order to be produced to proper officer of court required to enforce the same. Production of such copy shall be evidence of that order. Such 2nd court shall enforce matters in the same manner.


Voluntary Winding up (SEC 358 to 395) Circumstances for voluntary winding up:

A company may be voluntary wound up under following circumstances

1. When period, if any, fixed by articles expires; or 2. Where event, if any, occurs the occurrence of which AOA provides for dissolution and company in

general meeting passes a resolution for it 3. Where Company resolves by general meeting that company be wound up voluntary

Voluntary winding up deemed to commence at date on which resolution passed.

Consequences of winding up:

Company ceases to carry on business o except for requirements of winding up.

Corporate state/powers continue until company is dissolved.

Notice of resolution:

Notice of resolution for winding up company is to be given within 10 days

By advertisement in Official Gazette In newspapers having circulation in

Province of registered office For listed; also in Province of Stock exchange (English & Urdu)

To Registrar

Declaration of solvency:

Directors of company (if more than 3, majority of Directors including Chief Executive) shall at a meeting of Board of Directors make a declaration, verified by affidavit to the effect that they have made full enquiry and concluded that

1. Company has no debts or 2. Company is able to pay its debts within 12 months of commencement of winding up.

Declaration shall not be effective unless Made within 5 weeks immediately preceding date of resolution Delivered to registrar for registration within 5 weeks of passing of resolution Supported by auditors report on P&L A/C and Balance Sheet.

If Directors make declaration without reasonable ground they will be punishable Imprisonment of six months or Fine Rs. 10,000 or Both

o If debts are not paid within specified period, it will be assumed that directors did not have any reasonable ground.

M em bers V oluntary w inding upM em bers V oluntary w inding upM em bers V oluntary w inding upM em bers V oluntary w inding up

Appointment of liquidator:

Company in general meeting shall appoint one or more liquidators to wind up affairs and distribute assets, receiving

Such meeting may fix Remuneration, otherwise it will be same as in winding up by court

On appointment all Powers of Directors, Chief Executives & other officers cease except so far as Company in general meeting or liquidators allows for


Giving notice of resolution to wind up company. Appointment of Liquidator Filing consent of Liquidator.

If any vacancy occurs by death & resignation or otherwise in office of liquidator, company in general meeting may fill, subject to arrangement with creditors.

For this purpose general meeting may be called by Out going liquidator: or Continuing liquidator or Any contributory or Court on application of

Registrar or Any other person interested in winding up

Meeting shall be held in manner provided by Co.Ord 1984 or AOA or court may determine

Company shall give notice to registrar within 10 days of appointment, filling vacancy etc

Calling creditors meeting in case of insolvency

Liquidator shall call a meeting of creditors where 12 months expires without paying debt or Liquidator thinks that company is unable to pay debt in stated time.

OL shall present Statement of Affairs. Creditors may appoint different liquidator who has consented to act as such. Notice of meeting, Return of meeting and Statement of Affairs are to be sent to Registrar within 10 days

of meeting.

Duty of Liquidator to call general meeting at end of each year:

If winding up continues for more than 1 year liquidator shall summon a general meeting of company at End of 1st year of commencement of winding up Within 30 days of extended period, where proceedings are not concluded during 1st year and

extension is granted.

Liquidator shall lay before general meeting Audited receipts and payments Dealing as liquidator & conduct of winding up Reason for delay, steps taken, time required.

Return of convening meeting, notice, statements shall be filed to Registrar within 10 days.

Final meeting and Dissolution:

1. As soon as affairs of company are fully wound up, Liquidator shall Make up a report & accounts of winding up, showing how it has been conducted and how

property being disposed off. Call a general meeting of Company for giving report + notice + any explanation Get accounts audited and copy of audited accounts with auditors report shall be sent to

each contributory by post at least 10 days before meeting

2. Notice for meeting must be published at least 10 days before meeting 3. Within 1 week after meeting Liquidator shall sent followings to Registrar:

a. Copy of his report and account b. Return of holding meeting + minutes or c. Return of non-holding meeting + fact of no quorum


4. Registrar shall register it these documents after scrutiny 5. On expiration of 3 months company deemed to be dissolved. 6. Court may order to defer date of winding up on application of liquidator or interested person and

certified copy of this order is to be filed with Registrar.

Powers to accept shares etc. as consideration:

Liquidator of transferor company, with sanction of special resolution of company, may have general or special authority to

Accept shares or interest in profits of Transferee Company for distribution among members of Transferor Company

Any dissenting member of transferor company shall apply to liquidator within 7 days for Abstain from carrying resolution into effect Purchase of his interest at price determined by agreement/arbitration

V oluntary w inding up by creditorsV oluntary w inding up by creditorsV oluntary w inding up by creditorsV oluntary w inding up by creditors

Meeting of Creditors:

Company shall call a meeting of creditors on or very next day of members meeting on which resolution of winding up was passed.

Notice of both meetings shall be sent together Notice of creditors meeting shall be advertised in same manner

Directors and Chief Executive of company shall Cause, a full statement of companys affairs together with list of creditors(and estimated

amount of their claims), to be laid before creditor meeting. Appoint one of directors to preside at meeting, who shall attend & preside accordingly

If meeting of voluntary winding up is adjourned, resolution passed at creditors meeting shall be deemed to have been passed immediately after adjourned meeting is held

Notice of any resolution passed at creditors meeting is to be given to registrar within 10 days along with consent of appointed liquidator.

Appointment of liquidators:

Creditors and company at their respective meetings may nominate a person who has given written consent to act as liquidator

If liquidator not appointed by either of creditor or company, liquidator appointed by other shall be liquidator.

If creditor & company select different persons as liquidator, creditors shall override company

Company shall within 7 days of nomination by creditors may apply to court for an order directing Person nominated by company shall be liquidator instead of or jointly with nominated by

creditors Any other person to be liquidator (by Court)

On appointment all Powers of Directors, Chief Executives & other officers cease except so far as Company in general meeting or liquidators allows for

Giving notice of resolution to wind up company. Appointment of Liquidator & filing his consent If COI or Creditor(if no COI) may sanction continuation

Committee of Inspection (COI)

Creditors at their meeting may appoint a COI containing not more than 5 members


Company shall appoint not more than 5 of its members to act as members of COI at meeting for passing winding up resolution or subsequently

Creditor may refuse all/any of said persons, unless court direct otherwise o Court may on application by company, appoint other person to act as member in place of those

rejected by creditors

Main Difference between members & creditors voluntary winding up

The winding up for which declaration of solvency has been made and delivered to registrar is termed as Members Voluntary winding up, otherwise it would be Creditors voluntary winding up

Provisions same in members/creditors voluntary winding up

Subject to following Exception

Remuneration of auditor

Same

Filing vacancy of liquidator

Same

Powers of liquidator to accept shares etc as consideration

Powers not exercised unless court/COI sanction it

Creditors meeting in insolvency Liquidator bound to call meeting of both creditors and members

Final meeting and dissolution Liquidator bound to call meeting of both, and Person obtaining order shall file same with registrar within 10 days (not 14 days)

P rovisions applicable to every V oluntary W inding U pP rovisions applicable to every V oluntary W inding U pP rovisions applicable to every V oluntary W inding U pP rovisions applicable to every V oluntary W inding U p

Accounts and Statements to be audited

All accounts and statements being placed before meetings of creditors or contributories shall be duly audited by an auditor.

Auditors report shall be annexed to these accounts etc Auditor shall submit his report within two months of end of period.

Distribution of property of company

Properties of company on winding up be applied in satisfaction of its liabilities pari passu. Subject to such application, distributed to members according to their rights, unless AOA provides

otherwise.

Powers and duties of liquidator in voluntary winding up

Exercise powers of court of setting lists of contributories Exercise Powers of court to make calls

Creditor/contributory may apply to court with respect to any powers exercise by liquidator

Liquidator shall pay debts of company and shall adjust rights of contributories among themselves Following powers/duties are same as in winding up by court

Distribution of funds Period of winding up [1 year/ extended period by court] Liability for misfeasance or breach of trust etc Determination of duties by court among more than 1 liquidator


Power of court to appoint & remove liquidator

Court may appoint liquidator, he would have same powers/obligations as in winding up by court Court may remove & appoint new one on application of creditors/contributory/registrar Remuneration fixed by court as in case of winding up by court

Miscellaneous

Liquidator within 14 days of appointment publish in Official Gazette and deliver notice to registrar Any arrangement between company, in course of winding up, and creditors shall, subject to appeal within

21 days, be Binding on Company if sanctioned by special resolution Binding on creditors if accepted by 3/4th in number & value of creditors

Liquidator may apply to court for public examination of promoters, directors etc Expenses of winding up including remuneration of liquidator shall be paid in priority of all Where company is being wound up voluntarily and order is made for winding up by court, court may adopt

all/any of proceedings of voluntary winding up

Power to apply to court to have questions determined or powers exercised

Liquidator or any contributory or any creditor may apply to court to Determine any question arising in winding up of company Exercise all/any powers of court as if it was winding up by court.

Court may, if think fit, accede wholly/partly for above on conditions as think fit Copy of order staying proceedings of winding up forwarded by company to registrar.


Winding up subject to supervision of court (SEC 396 to 401) Power to order winding up subject to supervision

Where co has passed resolution for voluntary winding up, court may Of its own motion or On application of any person entitled to apply court for winding up

make an order of continuance of voluntary winding up but subject to supervision of court with such liberty to creditor/contributory etc, & with such conditions as think fit.

Petition of continuance of voluntary winding up under supervision of court shall be deemed to be petition for winding up by court for purposes of legal proceedings

Winding up subject to supervision of court and effect on liquidator

Court shall appoint an official liquidator who would replace liquidator appointed by company On application by creditor/contributory/registrar/persons authorized by SECP

Liquidator shall, subject to restrictions imposed by courts, exercise all his powers as liquidator of voluntary winding up without sanction of court

Order for winding up under supervision sh

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