The Companies Ordinance, 1984

The Companies Ordinance, 1984

PAT-XI
WINDING UP
PRELIMINARY

297. Modes of winding up:-

(1) The winding up of a company may be either:-

(i) by the Court; or

(ii) voluntary; or

(iii) subject to the supervision of the Court.

(2) Save as otherwise expressly provided, the provisions of this Ordinance with respect to winding up shall apply to the winding up of a company in any of the modes specified in sub-section (1).

CONTRIBUTORIES

298. Liability as contributories of present and past members:-

(1) In the event of a company being would up, every present and past member shall, subject to the provision of section 299, be liable to contribute to the assets of the company to an amount sufficient for payment of its debts and liabilities and the costs, charges and expenses of the winding up, and for the adjustment of the rights of the contributories among themselves, with the qualifications following, that is to say:-

(i) a past member shall not be liable to contribute if he has ceased to be a member for one year or upwards before the commencement of the winding up;

(ii) a past member shall not be liable to contribute in respect of any debt or liability of the company contracted after he ceased to be a member;

(iii) a past member shall not be liable to contribute unless it appears to the Court that the present members are unable to satisfy the contributions required to be made by them in pursuance of this Ordinance;

(iv) in the case of a company limited by shares, no contribution shall be required from any past or present member exceeding the amount, if any, unpaid on the shares in respect of which he is liable as such member;

(v) in the case of a company limited by guarantee, no contribution shall, subject to the provisions of sub-section (2), be required from any past or present member exceeding the amount undertaken to be contributed by him to the assets of the company in the event of its being wound up;

(vi) nothing in this Ordinance shall invalidated any provision contained in any policy of insurance or other contract whereby the liability of individual members on the policy or contract is restricted, or whereby the funds of the company are alone made liable in respect of the policy or contract; and

(vii) a sum due to any past or present member of a company in his character as such by way of dividends, profits or otherwise, shall not be deemed to be a debt of the company payable to that member in a case of compensation between himself and any other creditor not being a member of the company, but any such sum may be taken into account for the purpose of the final adjustment of the rights of the contributories among themselves.

299. Liability of directors whose liability is unlimited:-

In the winding up of a limited company any director, whether past or present, whose liability is, in pursuance of his Ordinance, unlimited, shall, in addition to his liability, if any, to contribute as an ordinary member, be liable to make a further contribution as if he were, at the commencement of the winding up, a member of any unlimited company:

Provided that:-

(i) a past director shall not be liable to make such further contribution if he has ceased to hold office for a year or upwards before the commencement of the winding up;

(ii) a past director shall not be liable to make such further contribution in respect of any debt or liability of the company contracted after he ceased to hold office;

(iii) subject to the articles, a director shall not be liable to make such further contribution unless the Court deems it necessary to require that contribution in order to satisfy the debts and liabilities of the company, and the costs, charges and expenses of the winding up.

300. Definition of "contributory":-

The term "contributory" means every person liable to contribute to the assets of a company in the event of its being wound up, and includes the holder of any shares which are fully paid-up; and, in all proceedings for determining, and all proceedings prior to the final determination, of, the persons who are to be deemed contributories any person alleged to be a contributory.

301. Nature of liability of contributory:-

(1) The liability of contributory shall create a debt accruing due from him at the time when his liability commenced, but payable at the time specified in calls made on him for enforcing the liability.

(2) No claim founded on the liability of a contributory shall be cognizable by the Court of Small Causes.

302. Contributories in case of death of member:-

(1) If a contributory dies either before or after he has been placed on the list of contributories, his legal representatives shall be liable, in a due course of administration, to contribute to the assets of the company in discharge of his liability, and shall be contributories accordingly.

(2) If the legal representatives make default in paying and money ordered to be paid by them, proceedings may be taken for administering the property of the deceased contributory, and of compelling payment thereout of the money due.

303. Contributory in case of insolvency of member:-

If a contributory is adjudged insolvent either before or after he has been placed on the list of contributories, then:-

(a) his assignees in insolvency shall represent him for all the purposes of the winding up, and shall be contributories accordingly, and may be called on to admit to proof against the estate of the insolvent, or otherwise to allow to be paid out of his assets in due course of law, any money due from the insolvent in respect of his liability to contribute to the assets of the company; and

(b) there may be proved against the estate of the insolvent the estimated value of his liability to future calls as well as calls already made.

304. Contributories in case of winding up of a body corporate which is a member:-

If a body corporate which is a contributory is ordered to be wound up, either before or after it has been placed on the list of contributories:-

(a) the liquidator of the body corporate shall represent if for all purposes of the winding up of the company and shall be a contributory accordingly, and may be called on to admit to proof against the assets of the body corporate, or otherwise to allow to be paid out of its assets in due course of law, any money due from the body corporate in respect of its liability to contribute to the assets of the company; and

(b) there may be proved against the assets of the body corporate the estimated value of its liability to future calls as well as calls already made.

WINDING UP BY COURT

CASES IN WHICH COMPANIES MAY BE WOUND UP BY COURT

305. Circumstances in which company may be wound up by Court:-

A company may be wound up by the Court:-

(a) if the company has, by special resolution, resolved that the company be wound up by the Court.

(b) if default is made in delivering the statutory report to the registrar or in holding the statutory meeting or any two consecutive annual general meetings;

(c) if the company does not commence its business within a year from its incorporation, or suspends its business for a whole year;

(d) if the number of members is reduced, in the case of private company, below two or, in the case of any other company, below seven;

(e) if the company is unable to pay its debts;

(f) if the company is:-

(i) conceived or brought forth for, or is or has been carrying on, unlawful or fraudulent activities;

(ii) carrying on business not authorised by the memorandum;

(iii) conducting its business in a manner oppressive to any of its members or persons concerned with the formation or promotion of the company or the minority shareholders;

(iv) run and managed by persons who fail to maintain proper and true accounts, or commit fraud, misfeasance or malfeasance in relation to the company; or

(v) managed by persons who refuse to act according to the requirements of the memorandum or articles or the provisions of this Ordinance or fail to carry out the directors or decisions of the Court or the registrar or the Authority given in the exercise of powers under this Ordinance;

(g) if, being a listed company, it ceases to be such company; or

(h) if the Court is of opinion that it is just and equitable that the company should be wound up.

Explanation.:-

The promotion or the carrying on of any scheme or business, except the business carried on under the provisions of the Insurance Act, 1938 (IV of 1938), howsoever described, whereby, in return for a deposit or contribution, whether periodically or otherwise, or a sum of money in cash or by means of coupons, certificates, tickets or other documents, payment, at future date or dates of money or grant of property, right or benefit, directly or indirectly, and whether with or without any other right or benefit, determined by chance or lottery or any other like manner, is assured or promised shall be deemed to be an unlawful activity.

Explanation II.:-"Monitory shareholders" means shareholders together holding not less than twenty percent, of the equity share capital of the company.

306. Company when deemed unable to pay its debts:-

(1) A company shall be deemed to be unable to pay its debts:-

(a) if a creditor, by assignment or otherwise, to whom the company is indebted in a sum exceeding one per cent of its paid-up capital or fifty thousand rupees, whichever is less, than due, has served on the company, by causing the same to be delivered by registered post or otherwise, at its registered office, a demand under his hand requiring the company to pay the sum so due and the company has for thirty days thereafter neglected to pay the sum, or to secure or compound for it to the reasonable satisfaction of the creditor; or

(b) if execution or other process issued on a decree or order of any Court or any other competent authority in favour of a creditor of the company is returned unsatisfied in whole or in part; or

(c) if it is proved to the satisfaction of the court that the company is unable to pay its debts, and, in determining whether a company is unable to pay its debts, the Court shall take into account the contingent and prospective liabilities of the company.

(2) The demand referred to in clause (a) of sub-section (1) shall be deemed to have been duly given under the hand of the creditor if it is signed by an agent or legal adviser duly authorised on his behalf, or in the case of a firm if it is signed by such agent or legal adviser or by any member of the firm on behalf of the firm.

TRANSFER OF PROCEEDINGS

307. Transfer of proceedings to other Courts:-

Where the High Court makes an order for winding up a company under his Ordinance, it may, if it thinks fit, direct all subsequent proceedings to be had in a Civil Court empowered by the Federal Government under sub-section (1) of section 7 or, with the consent of any other High Court, in such High Court or in a Civil Court subordinate thereto; and thereupon, for the purposes of the winding up of the company, such High Court of Civil Court, as the case may be, shall be deemed to be the "Court" within the meaning of this Ordinance and shall have all the powers and jurisdiction of the Court thereunder.

308. Withdrawal and transfer of winding up from one Court to another:-

If, during the progress of a winding up in a Civil Court, it is made to appear to the High Court that the same could be more conveniently proceeded with in the High Court or in any Civil Court empowered by the Federal Government under sub-section (1) of section 7 the High Court may, as the case may require:-

(a) withdraw the case and proceed with the winding up itself; or

(b) transfer the case to such Civil Court, and thereafter the winding up shall proceed in such Civil Court.

PETITION FOR WINDING UP

309. Provisions as to application for winding up:-

An application to the Court makes an order for winding up a company under this Ordinance, if may, if it thinks fit, direct all subsequent proceedings to be had in a Civil Court empowered by the Federal Government under sub-section (1) of section 7 or, with the consent of any other High Court, in such High Court or in a Civil Court subordinate thereto; and thereupon, for the purposes of the winding up of the company, such High Court or Civil Court, as the case may be, shall be deemed to be the "Court" within the meaning of this Ordinance and shall have all the powers and jurisdiction of the Court thereunder.

Provided that:-

(a) a contributory shall not be entitled to present a petition for winding up a company unless:-

(i) either the number of members is reduced, in the case of a private company, below two, or, in the case of any other company, below seven; or

(ii) the shares in respect of which he is a contributory or some of them either were originally allotted to him or have been held by him, and registered in his name, for at least six months during the eighteen months before the commencement of the winding up, or have devolve on him through the death of a former holder;

(b) the registrar shall not be entitled to present a petition for the winding up of a company unless the previous sanction of the Authority has been obtained to the presentation of the petition:

Provided that no such sanction shall be given unless the company has first been afforded an opportunity of making a representation and of being heard;

(c) the Authority or a person authorised by the Authority in that behalf shall not be entitled to present a petition for the winding up of a company unless an investigation into the affairs of the company has revealed that it was formed for any fraudulent or unlawful purpose or that it is carrying on a business not authorised by its memorandum or that its business is being conducted in a manner oppressive to any of its members or persons concerned in the formation of the company or that its management has been guilty of fraud, misfeasance or other misconduct towards the company or towards any of its members; and such petition shall not be presented or authorised to be presented by the Authority unless the company has been afforded an opportunity of making a representation and of being heard;

(d) the Court shall not give a hearing to a petition for winding up a company by a contingent or prospective creditor until such security for costs has been given as the Court thinks reasonable and until a prima facie case for winding up has been established to the satisfaction of the Court;

(e) the Court shall not give a hearing to a petition for winding up a company by the company until the company has furnished with its petition, in the prescribed manner, the particulars of its assets and liabilities and business operations and the suits or proceedings pending against it.

310. Right to present winding up petition where company is being wound up voluntarily or subject to Court's supervision:-

(1) Where a company is being wound up voluntarily or subject to the supervision of the Court, a petition for its winding up by the Court may be presented by any person authorised to do so under section 309 and subject to the provisions of that section.

(2) The Court shall not make a winding up order on a petition presented to it under sub-section (1) unless it is satisfied that the voluntary winding up or winding up subject to the supervision of the Court cannot be continued with due regard to the interests of the creditors or contributories or both.

COMMENCEMENT OF WINDING UP

311. Commencement of winding up by Court:-

A winding up of a company by the Court shall be deemed to commence at the time of the presentation of the petition for the winding up.

POWERS OF COURT HEARING APPLICATION

312. Hearing of winding up petition by the Court:-

A petition for winding up of a company shall come up for regular hearing, be proceeded with and decided in the manner laid down in section 9.

313. Court may grant injunction:-

The Court may, at any time after presentation of the petition for winding up a company under this Ordinance, and before making an order for its winding up, upon the application of the company itself or of the any its creditors or contributories, restrain further proceedings in any suit or proceeding against the company, upon such terms as the Court thinks fit.

314. Power of Court on hearing petition:-

(1) On hearing a winding up portion the Court may dismiss it with or without costs, or adjourn the hearing conditionally or unconditionally subject to the limitation imposed in section 9 or make any interim order, or any order for winding up the company or any other order that it deems just; but the court shall not refuse to make a winding up order on the ground only that the assets of the company have been mortgaged to an amount equal to or in excess of those assets, or that the company has no assets.

(2) Where the petition is presented on the ground that it is just and equitable that the company should be wound up, the Court may refuse to make an order of winding up, if it is of opinion that some other remedy is available to the petitioners and that they are acting unreasonably is seeking to have the company wound up instead of pursuing that other remedy.

(3) Where the petition is presented on the ground of default in delivering the statutory report or in holding the statutory meeting or any two consecutive annual general meetings, the Court may, instead of making a winding up order, direct that the statutory report shall be delivered or that a meeting shall be held and order the costs to be paid by any persons who, in the opinion of the Court, are responsible for the default.

(4) If, on hearing a petition, the court is of opinion that, although the facts would justify the making of a winding up order, the making of such order would unfairly prejudice the members or the creditors, the Court may, instead of making an order for winding up the company, make such order as it thinks fit in the circumstances for regulating the conduct of the affairs of the company and bringing to an end the matters complained of, including an order for a change in the management of the company.

(5) Where the Court makes an order for the winding up of a company, it shall forthwith cause intimation thereof to be sent to the official liquidator appointed by it and to the registrar.

315. Copy of winding up order to be filed with registrar:-

(1) Within fifteen days from the date of the making of the winding up order, the petitioner in the winding up proceedings and the company shall file a certified copy of the order with the registrar.

(2) If default is made in complying with the foregoing provision, the petitioner or, as the case may require, the company, and every officer of the company who is in default, shall be punishable with fine which may extend to one hundred rupees for each day during which the default continues.

(3) On the filing of a certified copy of a winding up order, the registrar shall forthwith make a minute thereof in his books relating to the company, and shall simultaneously notify in the official Gazette that such an order has been made.

(4) Such order shall be deemed to be notice of discharge to the servants of the company, except when the business of the company is continued

316. Suits stayed on winding up order:-

(1) When a winding up order has been made or a provisional manager has been appointed, no suit or other legal proceeding shall be proceeded with or commenced against the company except by leave of the Court, and subject to such terms as the Court may impose.

(2) The Court which is winding up the company shall, notwithstanding anything contained in any other law for the time being in force, have jurisdiction to entertain, or dispose, of, any suit or proceeding by or against the company.

(3) Any suit or proceeding by or against the company which is pending in any Court other than that in which the winding up of the company is proceeding may, notwithstanding anything contained in any other law for the time being in force, be transferred to and disposed of by the Court.

317. Court may require expeditious disposal of suits, etc:-

(1) Notwithstanding anything contained in any other law:-

(a) if any suit or proceedings, including an appeal, by or against the company which is allowed to be proceeded with in any Court other than the Court in which winding up of the company is proceeding, the Court may issue directions to that other court if that Court is subordinate to it and, in any other case, make a request to that other Court for expeditious disposal of the pending suit or proceedings by or against the company; and

(b) if any proceedings, including proceedings for assessment or recovery of any tax, duty or levies or appeal or review petition against any order is pending or is likely to be instituted, before any officer, Tribunal, authority or other body, the Court may issue direction to that officer, Tribunal, authority or other body for expeditious action and disposal of the said proceedings.

(2) Upon issue of a direction or making of a request as aforesaid, the Court, officer, Tribunal, authority or body to whom the same is addressed shall, notwithstanding anything contained in any other law, proceed to dispose of the said suit or other proceedings expeditiously by according it special priority and adopting such measures as may be necessary in this behalf, and shall inform the Court issuing the direction or making the request of the action taken.

318. Effect of winding up order:-

An order for winding up a company shall operate in favour of all the creditors and of all the contributories of the company as if made on the joint petition of a creditor and of a contributory.

319. Power of Court to state winding up, etc:-

(1) The Court may at any time not later than three years after an order for winding up, on the application of any creditor or contributory or of the registrar or the Authority or a person authorised by it, and on proof to the satisfaction of the Court that all proceedings to the winding up ought to be stayed, withdrawn, cancelled or revoked, make an order accordingly, on such terms and condition as the Court thinks fit.

(2) On the application under sub-section (1), the Court may, before making an order, required the official liquidator to furnish to the Court a report with respect to any facts or matters which are in his opinion relevant to the application.

(3) A copy of every order made under sub-section (1) shall forthwith be forwarded by the Court to the registrar, who shall make a minute of the order in his books relating to the company.

320. Court to have regard to wishes of creditors or contributories:-

The Court shall, as to all matters relating to a winding up, have regard to the wishes of the creditors or contributories as proved to it by any evidence.

OFFICIAL LIQUIDATORS

321. Appointment of official liquidator:-

(1) For the purposes of this Ordinance, so far as it relates to the winding up of companies by the Court, the Court shall maintain, from amongst persons recommended by the Authority, a panel of persons from whom it shall appoint a provisional manager or official liquidator of a company ordered to be wound up by the Court.

(2) In the order winding up a company the Court shall appoint one or more of the persons on the panel maintained as aforesaid to act as official liquidator of the company and thereupon such person or persons shall, unless, within three days of the communication of the order, he or they inform or informs the Court of his or their inability to act as such, forthwith start performing the duties and functions of official liquidator in relation to that company and continue to perform such duties and functions till the conclusion of winding up proceedings.

(3) If more persons than one are appointed to the office liquidator, the Court shall declare whether any act by this Ordinance required or authorise to be done by the official liquidator is to be done by all or any one or more of such persons.

(4) The Court may determine whether any, and what, security is to be given by any official liquidator on his appointment.

(5) Any vacancy in the office of an any official liquidator shall be filled up by the Court by the appointment of another person on the panel referred to in sub-section (1).

(6) Notwithstanding anything contained in sub-section (1) or sub-section (5), the Court may, if it considers it necessary so to do for reasons to be recorded, or on the application of creditors to whom amounts not less than sixty per cent of the issued share capital of the company being wound up are due, after notice to the registrar, appoint a person (other than the official receiver) whose name does not appear on the panel maintained for the purpose, to be the official liquidator.

322. Resignation, removal, filling up vacancies, etc., of official liquidator:-

(1) An official liquidator shall not resign or quit his office as official liquidator before conclusion of the winding up proceedings except for reasons of personal disability to the satisfaction of the Court.

Provided that an official liquidator may at any time be removed by the Court for reasons to be recorded.

(2) Any vacancy in the office of an official liquidator shall be filled up by the Court by the appointment of another person from the panel maintained section 321; and, until the person so appointed in his stead takes charge, the outgoing official liquidator shall, unless the Court directs otherwise, continue to act as the official liquidator.

323. Remuneration of official liquidator:-

(1) An official liquidator, not being a salaried officer of Government or of the Court, shall be entitled to such remuneration by way of percentage of the amount realised by him by disposal of assets or otherwise as may be fixed by the Court having regard to the amount and nature of the work actually done and subject to such limits as may be prescribed:

Provided that different percentage rates may be fixed for different types of assets and items.

(2) In addition to the remuneration payable under sub-section (1), the Court may permit payment of a monthly allowance to the official liquidator for meeting the expenses of the winding up for a period not exceeding twelve months from the date of the winding up order.

(3) The remuneration fixed as aforesaid shall to be enchanted subsequently but may be reduced by the Court at any time.

(4) If the official liquidator resigns, is removed from office or otherwise ceases to hold office before conclusion of the winding up proceedings, he shall not be entitled to any remuneration and the remuneration already received by him, if any, shall be refunded by him to the company.

324. Style of official liquidator:-

An official liquidator shall be described by the style of the official liquidator of the particular company in respect of which he acts, and not by his individual name.

325. Appointment and powers of provisional manager:-

(1) At any time after the presentation of winding up petition and before the making of a winding up order, the Court may appoint a person eligible for appointment as official liquidator under section 321 to be provisional manager.

(2) Before appointing a provisional manager, the Court shall give notice to the company and afford to it a reasonable opportunity to make its representations, of any, unless, for special reasons to be recorded, the Court thinks fit to dispense with such notice.

(3) Where a provisional manager is appointed by the Court, the Court may limit and restrict his powers by the order appointing him or by a subsequent order; but otherwise he shall have the same powers as a liquidator.

(4) Unless the Court directs otherwise the provisional manager shall cease to hold office as provisional manager on the winding up order being made.

326. General provisions as to liquidators:-

(1) The official liquidator shall conduct the proceedings in winding up the company any perform such duties in reference thereto as the Court may impose.

(2) The acts of a liquidator shall be valid, notwithstanding any defect that may afterwards be discovered in his appointment or qualification:

Provided that nothing in this sub-section shall be deemed to give validity to acts done by a liquidator after his appointment has been shown to be invalid.

(3) The winding up proceedings shall be completed by the official liquidator with a period of one year from the date of commencement of winding up:

Provided that the Court may, on the application of the official liquidator, grant extension by one month at any one time but the extensions so granted shall not exceed a period of six months in all and shall be allowed only for the reason that any proceedings for or against the company are pending in a Court superior to the Court in which liquidator proceedings are in progress.

(4) If an official liquidator is convicted of misfeasance, or breach of duty or other lapse or default in relation to winding up proceedings of a company, he shall cease to be the official liquidator of the company and shall also become disqualified, for a period of five years from such conviction, from being the liquidator or to hold any other office including that of a director, in any company and if he already holds any such office he shall forthwith be deemed to have ceased to hold such office.

(5) The registrar and the Authority shall take cognizance of any lapse, delay or other irregularity on the part of the official liquidator and may, without prejudice to any other action under the law, report the same to the Court.

327. Receiver not to be appointed of assets with liquidator:-

A receiver shall not be appointed of assets in the hands of a liquidator except by, or with they leave of, the Court.

328. Statement of affairs to be made to official liquidator:-

(1) Where the Court has made a winding up order or appointed an official liquidator or provisional manager, there shall be made out and submitted to the official liquidator or provisional manager, there shall be made out and submitted to the official liquidator or provisional manager a statement as to the affairs of the company in the prescribed form, verified by an affidavit, and containing the following particulars, namely::-

(a) the assets of the company, stating separately the cash balance in hand and at the bank, if any, and the negotiable securities, if any, held by the company;

(b) the debts and liabilities of the company;

(c) the names, residences and occupations of the creditors of the company, stating separately the amount of secured debts and unsecured debts, and, in the case of secured debts particulars of the securities given, their value and the dates when they were given;

(d) the debts due to the company and the names, residences and occupations of the persons from whom they are due and the amount likely to be realised therefrom;

(e) where any property of the company is not in its custody or possession, the place where and the person in whose custody or possession such property is;

(f) full address of the places where the business of the company was conducted during the six months preceding the relevant date and the names and particulars of the persons in charge of the same;

(g) details of any pending suits or proceedings in which the company is a party; and

(h) such other particulars as may be prescribed or as the Court may order or the official liquidator or provisional manager may require in writing, including any information relating to secret reserves and personal assets of directors.

(2) The statement shall be submitted and verified by person who are at the relevant date the directors any by the persons who are at that date the chief executive and secretary of the company, or by such of the persons hereafter in this sub-section mentioned as the official liquidator or provisional manager, subject to the direction of the Court, may require to submit and verify the statement, that is to say, persons:-

(a) who are or have been directors, chief executives or officers of the company within one year from the relevant date;

(b) who have taken part in the formation of the company at any time within one year before the relevant date;

(c) who are in the employment of the company, or have been in the employment of the company with the said year, and are in the opinion of the official liquidator or provisional manager capable of giving the information required.

(d) who are or have been within the said year officers of, or in the employment of, a company which is, or within the said year was, an officer of the company to which the statement relates.

(3) The statement shall be submitted within twenty-one days from the relevant date, or within such extended time not exceeding forty-five days from the date as the official liquidator or provisional manager or the Court may, for special reason, appoint.

(4) Any person making, or concurring in making, the statement and affidavit required by this section shall be allowed, and shall be paid by the official liquidator or provisional manager, as the case may be, out of the assets of the company, such costs and expenses incurred in and about the preparation and making of the statement and affidavit as the official liquidator or provisional manager may consider reasonable, subject to an appeal to the Court.

(5) If any person, without reasonable excuse, make default in complying with the requirements of this section, he shall be liable to a fine not exceeding five hundred rupees for every day during which the default continues.

(6) Without prejudice to the operation of imposing penalties in respect of any such default as aforesaid, the Court which makes the winding up or appoints a provisional manager may take cognizance of any offence under sub-section (5) and try the offence itself in accordance with the procedure laid down in the Code of Criminal Procedure, 1898 (Act V of 1898), for the trial of cases by Magistrates and further direct the persons concerned to comply with the provision of this section within such time as may be specified by it.

(7) Any person stating himself in writing to be a creditor or contributory of the company shall be entitled, by himself or by his agent, at all reasonable times, on payment of the prescribed fee, to inspect the statement submitted in pursuance of this section, and to a copy thereof or extract there from.

(8) Any person untruthfully so stating himself to be a creditor or contributory shall be guilty of an offence under section 182 of the Pakistan Penal Code, 1860 (Act XLV of 1860), and shall, on the application of the official liquidator or provisional manager, be punishable accordingly.

(9) In this section, the expression "the relevant date" means, in a case where a provisional manager is appointed, the date of his appointment, and, in a case where no such appointment is made, the date of the winding up order.

329. Report by official liquidator:-

(1) In a case where a winding up order is made, the official liquidator shall, as soon as practicable after receipt of the statement to be submitted under section 328 and not later than thirty days, or such further period not exceeding thirty days as the Court may allow, from the date of the winding up order submit a preliminary report to the Court:-

(a) as to the amount of capital issued, subscribed, and paid up, and the estimated amount of assets and liabilities, giving separately, under the heading of assets, particulars of:-

(i) cash, bank balances and negotiable securities;

(ii) debts due from contributories;

(iii) debts due to the company and securities, if any, available in respect thereof;

(iv) movable and immovable properties belonging to the company;

(v) unpaid calls; and

(b) if the company has failed, as to the cause of the failure; and

(c) whether in his opinion further inquiry is desirable as to any matter relating to the promotion, formation, or failure of the company, or the conduct of its business.

(2) The official liquidator may also, if he thinks fit, make a further report, or further reports, stating the manner in which the company was promoted or formed and whether in his opinion any fraud has been committed by any person in its promotion or formation, or by any director or other officer of the company in relation to the company since its formation, and any other matter which, in his opinion, it is desirable to bring to the notice of the Court.

(3) If the official liquidator states in any such report or further report that in his opinion a fraud has been committed as aforesaid, the Court shall have the further power provided in sections 351, 352 and 353.

(4) A certified copy of the reports aforesaid shall also be sent to the registrar simultaneously with their submission to the Court.

330. Custody of company's property:-

(1) The provisional manager or official liquidator, as the case may be, shall take into his custody or under his control, all the books and papers, property, effects and actionable claims belonging to or to which the company is or appears to be entitled; and all persons who are or have been directors, chief executives, managers, officers, servants, bankers, auditors or agents of the company and who may be having in their knowledge, custody, control or charge, directly or under them any such books or papers, property, effects and actionable claims, shall forthwith report and hand over or cause to be handed over possession to the liquidator of all such items and furnish to the liquidator such information and explanations as he may require and any default or failure on their part shall be punishable with imprisonment of either description which may extend to one year and with fine which may extend to ten thousand rupees and the Court may direct the books or papers, property and effects to be delivered to the liquidator in case of default or failure, and in the event of non-compliance with the directive, to order the person in default to pay further amount by way of compensation equal the value of the property as the Court may determine.

(2) For the purpose of enabling the provisional manager or the official liquidator, as the case may be, to take in to his custody or under his control any property, effects, actionable claims or books of account or other documents to which the company is or appears to be entitled, the provisional manager or the official liquidator, as the case may be, may by writing request the District Magistrate within whose jurisdiction such property, effects, or actionable claims or books of account or other documents may be found to take possession thereof, and the District Magistrate shall thereupon, after such notice as he may think fit to give to any party, take possession of such property, effects, actionable claims, books of account or other documents and deliver possession thereof to the provincial manager or the official liquidator, as the case may be.

(3) For the purpose of securing compliance with the provisions of sub-section (2), the District Magistrate may, take or cause to be taken such steps, and use or cause to be used such force, as may in his opinion be necessary.

(4) All the property and effects of the company shall be deemed to be in the custody of the Court as from the date of the order for the winding up of the company.

331. Committee of inspection in compulsory winding up:-

(1) When a winding up order has been made by the Court, the liquidator shall within thirty days summon separate meetings of the creditors and contributories of the company for the purpose of determining whether or not an application is to be made to the Court for the appointment of a committee of inspection to act with the liquidator, and who are to be the members of the committee if appointed:

Provided that, where the winding up order has been made on the ground that the company is unable to pay its debts, it shall not be necessary for the liquidator to summon a meeting of the contributories.

(2) The Court may make any appointment and order required to give effect to any such determination, and if there is a difference between the determinations of the meetings of the creditors and contributories in respect of the matters aforesaid the Court shall decide the difference and make such order thereon as the Court may think fit.

332. Constitution and proceedings of committee of inspection:-

(1) A committee of inspection appointed under section 331 shall consist of creditors and contributories of the company or persons holding general powers-of-attorney from creditors or contributories in such proportions as may be agreed on by the meetings of creditors and contributories or as, in case of difference, may be determined by the Court:

Provided that, where a winding up order has been made on the ground that a company is unable to pay its debts, the committee shall consist of creditors or persons holding general powers-of-attorney from creditors.

(2) The committee shall meet at such times as it may from time to time appoint, and, failing such appointment, at least once a month, and the liquidator or any member of the committee may also call a meeting of the committee as and when he thinks necessary.

(3) The committee may act by a majority of its members present at a meeting but shall not act unless a majority of the members of the committee are present.

(4) A member of the committee may resign by notice in writing signed by him and delivered to the liquidator.

(5) If a member of the committee becomes bankrupt or compounds or arranges with his creditors or is absent from five consecutive meetings of the committee without the leave of those members who together with himself represent the creditors or contributories, as the case may be, his office shall thereupon become vacant.

(6) A member of the committee may be removed by an ordinary resolution at a meeting of creditors, if he represents creditors, or at a meeting of contributories, if he represents contributories, of which seven days notice has been given, stating the object of the meeting.

(7) On a vacancy occurring in the committee the official liquidator shall forthwith summon a meeting of creditors or of contributories, as the case may require, to fill the vacancy, and the meeting may, by resolution, reappoint that same or appoint another creditor or contributory to fill the vacancy:

Provided that, if the official liquidator, having regard to the position in the winding up, is of the opinion that it is unnecessary for the vacancy to be filled, he may apply to the Court and the Count may make an order that the vacancy shall not be filled, or shall not be filled except in such circumstances as may be specified in the order.

(8) The continuing members of the committee, if not less than two, may act notwithstanding any vacancy in the committee.

333. Powers of official liquidator:-

(1) The liquidator in a winding up by the Court shall have power, with the sanction either of the Court or of the committee of inspection:-

(a) to institute or defend any suit, action, prosecution or other legal proceeding, civil or criminal, in the name and on behalf of the company;

(b) to carry on the business of the company so far as may be necessary for the beneficial winding up thereof;

(d) to make any compromise or arrangement with creditors or persons claiming to be creditors, or having or alleging themselves to have any claim, present or future, certain or contingent, ascertained or sounding only in damages against the company, or whereby the company may be rendered liable;

(e) to compromise all calls and liabilities to calls, debts and liabilities capable of resulting in debts, and all claims, present or future, certain or contingent, ascertained or sounding only in damages, subsisting or supposed to subsist between the company and a contributory or alleged contributory or other debtor or person apprehending liability to the company and all questions in on such terms as may be agreed, and take any security for the discharge of any such calls, debt, liability, or claim and give a complete discharge in respect thereof;

(f) to sell the movable and immovable property and things in action of the company by public auction or private contract, with power to transfer the whole thereof to any person or company or to sell the same in parcels.

(2) Subject to any general or special direction of the Court or of the committee of inspection, the liquidator in winding up by the Court shall have power:-

(a) to do all acts and to execute, in the name and on behalf of the company, all deeds, receipts and other documents, and for that purpose to use, when necessary, the company's seal;

(b) to prove, rank and claim in the bankruptcy, insolvency or sequestration of and contributory for any balance against his estate, and to receive dividends in the bankruptcy, insolvency or sequestration in respect of that balance, as a separate debt due from the bankrupt or insolvent, and ratably with the other separate creditors;

(c) draw, accept, make and endorse any bill of exchange or promissory note in the name and on behalf of the company, with the same effect with respect to the liability of the company as if the bill or note had been drawn, accepted, made or endorsed by or on behalf of the company in the course of its business;

(d) to raise on the security of the assets of the company any money requisite;

(e) to take in his official name letters of administration to any deceased contributory, and to do in his official name any other act necessary for obtaining payment of any money due from a contributory or his estate which cannot be conveniently done in the name of the company; and in all such cases the money due shall, for the purpose of enabling the liquidator to take out the letters of administration or recover the money, be deemed to be due to the liquidator himself;

(f) to appoint an agent to do any business which the liquidator is unable to do himself; and

(g) to do all such other acts and things as may be necessary for winding up the affairs of the company and distributing its assets.

(3) The exercise by the liquidator in a winding up by the Court of the powers conferred by this section shall be subject to the control of the Court, and any creditor or contributory or the registrar may apply to the Court with respect to any exercise or proposed exercise of any of the said powers.

334. Discretion of official liquidator:-

The Court may provide by any order that the official liquidator may, where there is no committee of inspection, exercise any of the powers mentioned in paragraph (a) or paragraph (b) of sub-section (1) of section 33 without the sanction or intervention of the Court.

335. Provision for assistance to official liquidator:-

The official liquidator may, with the sanction of the committee of section or, where there is no committee of inspection, with the sanction of the Court, appoint a person entitled to appear before the Court or such person as may be prescribed to assist him in the performance of his duties:

Provided that, where the official liquidator is an advocate, he shall not appoint his partner unless the latter to act without remuneration.

336. Liquidator to keep books containing proceedings of meetings, etc:-

The official liquidator of a company which is being wound up by the Court shall keep, the manner prescribed, proper books and papers in which he shall cause to be made entries of minutes of proceedings at meetings and of such other matters as may be prescribed, and any creditor or contributory may, subject to the control of the Court, personally or by his agent inspect any such books.

337. Liquidator's account:-

(1) Every official liquidator shall, at such times as may be prescribed but no less than twice in each year during his tenure of office, present to the Court an account of his receipts and payments and dealings as liquidator, together with such further information as may be prescribed.

(2) The account and information as aforesaid shall be in the prescribed form, shall be add in duplicate, and shall be verified by a declaration in the prescribed form.

(3) The Court shall cause the account and the books and papers of the official liquidator to be audited in such manner as it thinks fit and for the purpose of the audit the liquidator shall furnish the Court with such books and information as the Court may require, and the Court may at any time require the production of and inspect or cause to be inspected any books or papers kept by the liquidator.

(4) When the account and the books and papers have been audited, one copy thereof alongwith the auditor's report shall be filed and kept by the Court, and the other copy alongwith the auditor's report shall be delivered to the registrar for filing; and each copy shall be open to the inspection of any person on payment prescribed fee.

(5) The official liquidator shall cause a copy of the account when audited or a summary thereof to be sent by post to every creditor and contributory.

(6) The Federal Government may, by notification in the official Gazette, require that the account and information referred to in sub-section (1) shall be furnished to an officer to be designated by it for the purpose and that such officer shall cause the accounts to be audited; and, upon the publication of such notification, reference to "Court" in the proceeding provision of this section shall be construed as a reference to such officer.

338. Exercise and control of liquidator's powers:-

(1) Subject to the provisions of this Ordinance, the official liquidator of a company which is being wound up by the Court shall, in the administration of the assets of the company and in the distribution thereof among its creditors, have regard to any directions that may be given by resolution of the creditors or contributories at any general meeting or by the committee of inspection, and any directions given by the creditors or contributories at any general meeting shall in case of conflict be deemed to override any directions given by the committee of inspection.

(2) The official liquidator may summon general meetings of the creditors or contributories for the purpose of ascertaining their wishes, and it shall be his duty to summon meetings as such times as the creditors or contributories, by resolution, may direct, or whenever requested in writing to do so by one-tenth in value of the creditors or contributories, as the case may be.

(3) The official liquidator may apply to the Court for direction in relation to any particular matter arising in the winding up.

(4) Subject to the provisions of this Ordinance, the official liquidator shall use his own discretion in the administration of the assets of the company and in the distribution thereof among the creditors.

(5) If any person is aggrieved by any act or decision of official liquidator, that person may apply to the Court, and the Court may confirm, reverse or modify the act or decision compained of, and make such order as it thinks just in the circumstances.

339. Settlement of list of contributories and application of assets:-

(1) As soon as may be after making a winding up order, the Court shall settle a list of contributories, with power to rectify the register of members in all cases where rectification is required in pursuance of this Ordinance and shall cause the assets of the company to be collected and applied in discharge of its liabilities.

Provided that, where it appears to the Court that it will not be necessary to make calls on or adjust the rights of contributories, the Court may dispense with the settlement of a list of contributories.

(2) In settling the list of contributories, the Court shall distinguish between persons who are contributories in their own right and persons who are contributories as being representatives of, or liable for the debts of, others.

340. Power to require delivery of property:-

Without prejudice to the obligation imposed under any other provisions, the Court may, at any time after making a winding up order, require any contributory for the time being on the list of contributories and any trustee, receiver, banker, agent officer or employee or past officer or employee or authority of the company to pay, deliver, convey, surrender or transfer forthwith, or within such time as the Court directs, to the official liquidator any money, property or books and papers including documents in his hands to which the company is prima facie entitled.

341. Power to order payment of debts by contributory:-

(1) The Court may, at any time after making a winding up order, make an order on any contributory for the time being settled on the list of contributories to pay, in manner directed by the order, any money due from him or from the estate of the person whom he represents to the company, exclusive of any money payable by him or the estate by virtue of any call in pursuance of this Ordinance.

(2) The Court in making such an order may:-

(a) in the case of an unlimited company, allow to the contributory by way of set-off, any money due to him or to the estate which the represents from the company on any independent dealing or contract with the company, but not any money due to him as a member of the company inrespect of any dividend or profit; and

(b) in the case of a limited company, make to any director whose liability is unlimited or to his estate the like allowance.

(3) In the case of any company, whether limited or unlimited, when all the creditors are paid in full, any money due on any account whatever to a contributory form the company may be allowed to him by way of set-off any subsequent call.

342. Power of Court to make calls:-

(1) The Court may, at any time after making a winding up order, and either before or after it has ascertained the sufficiency of the assets of the company, make calls on and order payment thereof by all or any of the contributories for the time being settled on the list of the contributories to the extent of their liability, for repayment of any money which the Court considers necessary to satisfy the debts and liabilities of the company, and the costs, charges and expenses of winding up, and for the adjustment of the rights of the contributories among themselves.

(2) In making the call the Court may take into consideration the probability that some of the contributories may party or wholly fail to pay the call.

343. Power to order payment into bank:-

(1) The Court may order any contributory, purchaser or other person from whom, any money is due to the company to pay the same into the account of the official liquidator in a scheduled bank instead of to the official liquidator, and any such order may be enforced in the same manner as if it had directed payment to the official liquidator.

(2) Information about the making deposited shall be sent by the person paying it to the official liquidator within three days of the date of payment.

344. Regulation of account with Court:-

All moneys, bills, hundis, notes and other securities paid and delivered into the scheduled bank where the official liquidator of the company may have his account, in the event of a company being wound up by the Court, shall be subject in all respect to the orders of the Court.

345. Order on contributory conclusive evidence:-

(1) An order made by the Court on a contributory shall, subject to any right of appeal, be conclusive evidence that the money, if any, thereby appearing to be due or ordered to be paid is due.

(2) All other pertinent matters stated in the order shall be taken to be truly stated as against all persons, and in all proceedings whatsoever.

346. Power to exclude creditors not proving in time:-

The Court may fix a time or times within which creditors are to prove their debts or claims, or to be excluded from the benefit of any distribution made before those debts are proved.

347. Adjustment or rights of contributories:-

The Court shall adjust the rights of the contributories among themselves, and distribute any surplus among the persons entitled thereto.

348. Power to order costs:-

The Court may, in the event of the assets being insufficient to satisfy the liabilities, make an order as to the payment out of the assets of the costs, charges and expenses incurred in the winding up in such order or priority as the Court thinks just.

349. Distribution by official liquidator:-

Subject to any directions give by the Court, the official liquidator shall, within thirty days of the coming into his hands of funds sufficient to distribute among the creditors or contributories after providing for expenses of the winding up or for other preferential payments as provided in this Ordinance, distribute in accordance with the provisions of this Ordinance:

Provided that such portion of the funds as may be required for meeting any claim against the company which may be sub judice or subject-matter of adjudication or assessment shall not be distribute till the claim is finally settled:
Provided further that any amounts retained as aforesaid shall be invested by the official liquidator in Khas Deposit Certificates and the same shall be deposited by him with the Court and the distribution thereof shall be made by him after the pending claims are settled.

PART-XI-WINDING UP

PRELIMINARY

297. Modes of winding up:-

(1) The winding up of a company may be either:-

(i) by the Court; or

(ii) voluntary; or

(iii) subject to the supervision of the Court.

(2) Save as otherwise expressly provided, the provisions of this Ordinance with respect to winding up shall apply to the winding up of a company in any of the modes specified in sub-section (1).

CONTRIBUTORIES

298. Liability as contributories of present and past members:-

(i) a past member shall not be liable to contribute if he has ceased to be a member for one year or upwards before the commencement of the winding up;

(ii) a past member shall not be liable to contribute in respect of any debt or liability of the company contracted after he ceased to be a member;

299. Liability of directors whose liability is unlimited:-

Provided that:-

(i) a past director shall not be liable to make such further contribution if he has ceased to hold office for a year or upwards before the commencement of the winding up;

(ii) a past director shall not be liable to make such further contribution in respect of any debt or liability of the company contracted after he ceased to hold office;

300. Definition of "contributory":-

301. Nature of liability of contributory:-

(2) No claim founded on the liability of a contributory shall be cognizable by the Court of Small Causes.

302. Contributories in case of death of member:-

303. Contributory in case of insolvency of member:-

If a contributory is adjudged insolvent either before or after he has been placed on the list of contributories, then:-

304. Contributories in case of winding up of a body corporate which is a member:-

If a body corporate which is a contributory is ordered to be wound up, either before or after it has been placed on the list of contributories:-

(b) there may be proved against the assets of the body corporate the estimated value of its liability to future calls as well as calls already made.

WINDING UP BY COURT

CASES IN WHICH COMPANIES MAY BE WOUND UP BY COURT

305. Circumstances in which company may be wound up by Court:-

A company may be wound up by the Court:-

(a) if the company has, by special resolution, resolved that the company be wound up by the Court.

(b) if default is made in delivering the statutory report to the registrar or in holding the statutory meeting or any two consecutive annual general meetings;

(c) if the company does not commence its business within a year from its incorporation, or suspends its business for a whole year;

(d) if the number of members is reduced, in the case of private company, below two or, in the case of any other company, below seven;

(e) if the company is unable to pay its debts;

(f) if the company is:-

(i) conceived or brought forth for, or is or has been carrying on, unlawful or fraudulent activities;

(ii) carrying on business not authorised by the memorandum;

(iii) conducting its business in a manner oppressive to any of its members or persons concerned with the formation or promotion of the company or the minority shareholders;

(iv) run and managed by persons who fail to maintain proper and true accounts, or commit fraud, misfeasance or malfeasance in relation to the company; or

(g) if, being a listed company, it ceases to be such company; or

(h) if the Court is of opinion that it is just and equitable that the company should be wound up.

Explanation.:-The promotion or the carrying on of any scheme or business, except the business carried on under the provisions of the Insurance Act, 1938 (IV of 1938), howsoever described, whereby, in return for a deposit or contribution, whether periodically or otherwise, or a sum of money in cash or by means of coupons, certificates, tickets or other documents, payment, at future date or dates of money or grant of property, right or benefit, directly or indirectly, and whether with or without any other right or benefit, determined by chance or lottery or any other like manner, is assured or promised shall be deemed to be an unlawful activity.