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SECTION M - INVESTIGATION BY ADMINISTRATORS (a) In relation to each type of insolvency procedure available in the legal system of this country, what powers are given to, or duties imposed upon, each type of administrator to investigate, discover and report to a Court or to regulatory authorities of the government any breaches of the law by former management of the business organization? Winding up under the Companies Ordinance Under Section 329, the Official Liquidator (in the case of a company
wound up by the Court) or the Liquidator (in the case of voluntary
winding up) is required to submit a preliminary report to the Court
(in a winding up by the Court) or the Registrar of Companies (in
a voluntary winding up), which among other things is to provide
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. The Official Liquidator or Liquidator
may also make a further report stating the manner in which the company
was promoted or formed and whether in his opinion any fraud has
been committee by an person or officer of the company in its promotion
or formation or thereafter. If the Official Liquidator or Liquidator
states in his report or further report that a fraud has been committed,
then the Court has the power to summon persons suspected of having
property of the company (Section 351) and to order public examination
of promoters and directors (Section 352). Management by Administrator under the Companies Ordinance Under Section 295, the Administrator is empowered to require the delivery of property, records or documents relating to the company. (b) What methods are available to each type of administrator to exercise such powers or discharge such duties? (for example examinations of directors, powers to inspect books and records, obligations to report to government authorities.) Winding up under the Companies Ordinance This has been discussed above in this Report. Nonetheless, the Official Liquidator may apply to the court for summoning any officer of the company suspected of having in his possession, property of the company (Section 351). Where the Official Liquidator has made a report to the Court in terms of Section 329 that a fraud has been committed by any person in the promotion or formation of the company or by any director or other officer of the company, the Court may after consideration of the report, direct that such person, director or officer attend before Court to be publicly examined as to the promotion or formation as conduct of the business of the company or as to his conduct and dealings as director, manager or other officer of the company. The Official Liquidator is required to take part in the examination (Section 352). Similarly, a Liquidator may apply to the Court to exercise the above powers for the purposes of discharging his winding up duties in a voluntary winding up. As would be evident from above, a Court appointed liquidator is called the Official Liquidator and a liquidator appointed by the shareholders/creditors is called a "Liquidator. Management by Administrator under the Companies Ordinance Under Section 295, if any person fails to deliver to the Administrator any property, records or documents relating to the company or does not furnish any information required by him, the Administrator may notify the SEC, which may by order in writing, direct that such person pay a prescribed penalty, and in the case of a continuing failure, a further daily penalty for every day after the first during which the failure continues. SECTION N - TERMINATION OF ADMINISTRATION (a) In relation to each type of insolvency procedure available in the legal system of this country, by what means may be administration of the corporate debtor be terminated? Winding up under the Companies Ordinance: The administration ceases upon the dissolution of the company. Nonetheless, an Official Liquidator (appointed by the Court) may be replaced by the Court, as if for personal disability such a Liquidator resigns, the Court will appoint his replacement. A creditor appointed liquidator may resign only for personal disability or may be removed by the Court. His replacement is to be made by the creditors in general meeting. Management by Administrator under the Companies Ordinance: This administration ceases by order of the SEC. An Administrator may be replaced by the SEC. Rehabilitation of companies owning sick industrial units under the Companies Ordinance: By the completion of the implementation of the rehabilitation plan to the satisfaction of the Federal Government, or the rescinding of the rehabilitation plan by the Federal Government. (b) Who may initiate the termination of each type of insolvency procedure? - In the case of a winding up, administration ceases automatically
upon dissolution. (c) On what grounds may each type of insolvency procedure be terminated? Winding up under the Companies Ordinance In the case of winding up, after all the affairs of the company hav been wound up, including payment of the debts of the company to the creditors and undistributed assets refunded to the contributories. Further, Section 350 of the Companies Ordinance provides that when the affairs of a company have been wound up, or when the Court is of the opinion that the Official Liquidator cannot proceed with the winding up of a company for want of funds and assets, the Court will make an order that the company be dissolved from the date of the order, and the company stands dissolved accordingly. A similar power for the Courts would subsists in relation to voluntary winding up's. Management by Administrator under the Companies Ordinance This procedure may be withdrawn by the SEC, when satisfied that management of the affairs of the company is no longer required. Rehabilitation of companies owning sick industrial units under the Companies Ordinance This insolvency procedure may be terminated by the SEC once the rehabilitation plan has been implemented or for any other reasons as the Federal Government deems expedient. (d) What are the consequences for the corporate debtor of termination of the insolvency procedure? (for example to whom does control of the debtor revert following termination of the procedure; or if the debtor no longer exists, what are the procedures for and consequences of its dissolution?) In a winding up, the company is dissolved and ceases to exist.
Any money representing unclaimed dividends or undistributed assets
in the hands of the Official Liquidator or Liquidator at the date
of dissolution is paid into the State Bank of Pakistan to the credit
of the Federal Government in an account specified as the Companies
Liquidation Account (Section 432). Therefore, if any creditor has
not received his dividend, he may claim the same from the State
Bank of Pakistan. |
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