(a) In relation to each type of insolvency procedure available in the legal system of this economy, what assets of the corporate debtor are available to its administrator to satisfy the claims of its creditors?

 

Winding Up-Contributions by every present member and any past member who was a member within one year before the commencement of the winding up and was a member when the debt was contracted, all movable and immovable assets of the company including negotiable securities.

Receiver or Manager- Property/assets that are subject to a charge or are the subject of a suit.

Administrator-all property and assets of the company.

(a) To what extent and in what circumstances may the administrator of a corporate debtor take steps to recover assets of the debtor by overturning past transactions involving property of the debtor? (for example preferences given to certain creditors over others, invalid charges granted by the debtor, uncommercial transactions entered into by the debtor, profits on sales to and from the debtor at an undervalue or overvalue.)

 

Winding Up

Every transfer of shares and alteration in status of a member made after the commencement of winding up shall be void unless it is approved by the liquidator and any transfer of movable or immovable property, including actionable claims, or any delivery of goods if not made in the ordinary course of business or in favour of a purchaser or encumbrancer in good faith if made within one year before the presentation of the winding up petition shall be void against the liquidator (Sec.406).

The liquidator may also by leave of Court and within 12 months of the commencement of the winding up proceedings disclaim any property of the company which is burdened with onerous covenants, shares or stocks, unprofitable contracts or other property that is unsalable (Sec.407).

Any conveyance, mortgage, delivery of goods, payment, execution or other act relating to property made by or against the company within six months before commencement of the winding up shall which is deemed fraudulent shall be invalid. (Sec.408)

Any attachment, distress or execution put in force without leave of court or any sale without leave of court of any of the properties of the debtor company after commencement of winding up shall be void (Sec.410).

A floating charge on the undertaking or property of the company created within twelve months of the commencement of the winding up shall be invalid except to the amount of any cash paid to the company at the time of or subsequent to the creation of the charge plus a prescribed surcharge as determined by the SECP (Sec.411).

Appointment of an Administrator

Where it appears to the administrator that any purchase or sales agency contract has been executed or employment given to benefit any director or other person in whom the management vested or his nominees to the detriment of the company the administrator may with the written approval of the SECP terminate such contract or employment (Sec.295(4)).

(b) What powers or mechanisms are available to each type of administrator for investigation of the affairs of the corporate debtor, for examination of persons formerly involved in the management or control of the debtor, and for the discovery of assets of the debtor?

 

Winding Up

The liquidator has the power to take into his custody all assets of the company and has the power to cause any persons formerly involved in the management of the company to hand over such assets and to furnish to the liquidator such information and explanations as he may require (Sec.330). The Liquidator may also apply to the Court and ask for examination of officer or director of the company where in the opinion of the Liquidator any fraud has been committed in relation to the Company (Sec.352).

Appointment of administrator

The administrator may require any person to deliver to him any property, records or documents relating to the company or furnish any information required by him (Sec.295(9)).

(c) What procedures may be employed by each type of administrator for the recovery of assets of the corporate debtor which are available for distribution to creditors? (for example initiation of legal proceedings, compensation from directors.)

 

Winding Up-In the exercise of his powers hereinbefore mentioned the liquidator may seek the assistance of the District Magistrate having jurisdiction over the assets (Sec.330).

Administrator- The SECP has power under Section 295(9) to impose a fine of upto Rs. one million and a continuing fine for Rs. one thousand for each day of continuing default on any person failing to deliver any property of the company to the Administrator.