WINDING UP

PRELIMINARY

293. Modes of winding up. (1) The winding up of a company may be either

(a) by the Court or

(b) voluntary; or

(c) subject to the supervision of the Court.

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

294. Liability as contributories of present and past members. (1) In the event of a
company being wound up, every present and past member shall, subject to the provisions of
section 295, 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 following
qualifications, that is to say

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

(b) 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;

(c) 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 Act;

(d) 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;

(e) 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;

(f) nothing in this Act shall invalidate 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

(g) 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 competition between himself and any other credito
not being a member of the company, but any such sum may be taken into account for the
 purpose of the final adjustments of the rights of the contributories among themselves.

(2) In the winding up of a company limited by guarantee which has a share capital, every
member of the company shall be liable, in addition to the amount undertaken to be contributed
by him to the assets of the company in the event of its being wound up, to contribute to the
extent of any sum unpaid on any shares held by him, as if the company were a company limited
by shares.
295. 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 this Act,
unlimited, shall, in addition to his ability, 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 an unlimited company:

Provided that

(a) 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;

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

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.

contributory
contribute towards the assets of the company in the event of its being wound up.

Explanation. For the purposes of this section, it is hereby clarified that a person
holding fully paid-up shares in a company shall be considered as a contributory but shall have no
liabilities of a contributory under this Act whilst retaining rights of such a contributory.

297. Nature of liability of contributory. The liability of a 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.

298. Contributories in case of death of member. If a contributory dies, whether before

or after being placed on the list of contributories of a company:

(a) his legal representatives shall be liable, in due course of administration, to contribute
to the assets of the company in discharge of his liability, and shall be contributories
accordingly; and

(b) if the legal representatives make default in paying any money ordered to be paid by
them, proceedings may be initiated for administering the property of the deceased
contributory, and of compelling payment of the money due, out of assets of the
deceased.

299. Contributory in case of insolvency of member.-If a contributory is adjudged

insolvent whether before or after he has been placed on the list of contributories of a company,
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 further calls as well as calls already made.

300. 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, whether before or after it has
been placed on the list of contributories of a company

(a) the liquidator of the body corporate shall represent it 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

301. Circumstances in which a 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; or

(b) if default is made in delivering the statutory report to the registrar or in holding
the statutory meeting; or

(c) if default is made in holding any two consecutive annual general meetings; or

(d) if the company has made a default in filing with the registrar its financial
statements or annual returns for immediately preceding two consecutive
financial years; or

(e) if the company has violated any law, rules or regulations for the time being in
force; or

(f) if the number of members is reduced, in the case of public company, below
three and in the case of a private company below two; or

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

(h) if the company is

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

(ii) carrying on business prohibited by any law for the time being in force in
 Pakistan; or restricted by any law, rules or regulations for the time being
in force in Pakistan; or
(iii) conducting its business in a manner oppressive to the minority members or
persons concerned with the formation or promotion of the company; or

(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 Act or failed to carry
out the directions or decisions of the Commission or the registrar given in
the exercise of powers under this Act; or

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

(j) if the Court is of opinion that it is just and equitable that the company should be
wound up; or

(k) if a company ceases to have a member; or

(l) if the sole business of the company is the licensed activity and it ceases to operate
consequent upon revocation of a licence granted by the Commission or any other
licencing authority; or

(m) if a licence granted under section 42 to a company has been revoked or such a
company has failed to comply with any of the provisions of section 43 or where a
company licenced under section 42 is being wound up voluntarily and its liquidator
has failed to complete the winding up proceedings within a period of one year from
the date of commencement of its winding up; or

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

Explanation I. The promotion or the carrying on of any scheme or business, howsoever

described

(a) whereby, in return for a deposit or contribution, whether periodically or otherwise,

of 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; or

(b) raising unauthorised deposits from the general public, indulging in referral
marketing, multi-level marketing (MLM), Pyramid and Ponzi Schemes, locally or
internationally, directly or indirectly; or

(c) any other business activity notified by the Commission to be against public policy
or a moral hazard;
shall be deemed to be an unlawful activity.
Explanation II.-"Minority members" means members together holding not less than ten
percent of the equity share capital of the company.

302. 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 hundred thousand rupees, then 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.

303. Transfer of proceedings to other Courts.-Where the Court makes an order for
winding up a company under this Act, it may, if it thinks fit, direct all subsequent proceedings to
be held in any other High Court, with the consent of such court and thereupon, for the purposes

meaning of this Act and shall have all the powers and jurisdiction of the Court thereunder.

PETITION FOR WINDING UP

304. Provisions as to applications for winding up. An application to the Court for the
winding up of a company shall be by petition presented, subject to the provisions of this section,
either by the company, or by any creditor or creditors (including any contingent or prospective
creditor or creditors), or by any contributory or contributories, or by all or any of the aforesaid
parties, together or separately or by the registrar, or by the Commission or by a person authorised
by the Commission in that behalf:

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 public company, below three; and

(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 or devolved 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 Commission 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 Commission or a person authorised by the Commission 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
Commission unless the company has been afforded an opportunity of making a
representation and of being heard:

Provided that if sole business of the company is the licensed activity and that
licence is revoked, no investigation into the affairs of the company shall be required to
present the petition for winding up of the company;

(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.

305. Right to present winding up petition where company is being wound up

voluntarily or subject to Court 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 304 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 or it is in the public interest so to do.

306. 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.