Company benches of the high courts have been restrained from exercising certain powers of the Companies Act, 2017 including power of Securities and Exchange Commission of Pakistan (SECP) for reconstruction, amalgamation of companies or winding up of public sector companies wholly owned by the federal government.
In this regard, Finance Division has issued an SRO 1126(I)/2019 to amend SRO 840(I)/2017.
Earlier, Company benches of the High courts were empowered to exercise certain powers of the Companies Act, 2017 for reconstruction or amalgamation of companies or winding up of public interest companies, large-sized and medium-sized companies.
Through SRO.1126(I)/2019, now the powers cannot be exercised by the said benches pertaining to the public sector companies wholly owned directly or indirectly by the federal government.
Under SRO 840(I)/2017, in exercise of powers conferred by sub-section (8) of section 285 of the Companies Act, 2017, the minister-in-charge of the federal government has notified that the powers of the SECP conferred by section 279 to 283 and 285 of the said Act in respect of public interest companies, large-sized companies and medium-sized companies classified under the Third Schedule to the said Act shall be exercised by the Company Bench of the High Court having jurisdiction under the said Act.
Company Bench of the High Court would exercise SECP powers under section 279 of the Companies Act, 2017. The section 279 is related to the compromise with creditors and members. Where a compromise or arrangement is proposed between a company and its creditors or any class of them, or between the company and its members or any class of them, the Commission may, on the application of the company or of any creditor or member of the company or, in the case of a company being wound up, of the liquidator, order a meeting of the creditors or class of creditors, or of the members of the company or class of members, as the case may be, to be called, held and conducted in such manner as the Commission directs.
If a majority in number representing three-fourths in value of the creditors or class of creditors, or members, as the case may be, present and voting either in person or, where proxies are allowed, by proxy at the meeting agree to any compromise or arrangement, the compromise or arrangement shall, if sanctioned by the Commission be binding on the company, all its creditors, all the members, the liquidators and the contributories of the company, as the case may be.
The court may, at any time after an application has been made to the Commission under this section, stay the commencement or continuation of any suit or proceeding until final disposal of the application.
Company Bench of the High Court would exercise SECP powers under section 280 of the Companies Act, 2017. The section 280 is related to the power of Commission to enforce compromises and arrangements. Commission makes an order under section 279 sanctioning a compromise or an arrangement in respect of a company, it may at the time of making such order or at any time thereafter, give such directions in regard to any matter or make such modifications in the compromise or arrangement as it may consider necessary for the proper working of the compromise or arrangement.
If the Commission is satisfied that a compromise or arrangement sanctioned under section 279 cannot be worked satisfactorily with or without modification, it may, initiate proceedings for the winding up of the company. Company Bench of the High Court would exercise SECP powers under section 281 of the Companies Act, 2017. The section 281 deals with the information as to compromises or arrangements with creditors and members. Under section 281, where a meeting of creditor or any class of creditors, or of members or any class of members, is called.
Every director, including chief executive of the company and every trustee for debenture-holders of the company, shall give notice to the company of such matters relating to himself as may be necessary for the purposes of this section and on the request of the company shall provide such further information as may be necessary for the purposes of this section; and, if he fails to do so within the time allowed by the company, he shall be liable to a penalty of level-1 on the standard scale.
Company Bench of the High Court would exercise SECP powers under section 282 of the Companies Act, 2017. The section 282 deals with the powers of Commission to facilitate reconstruction or amalgamation of companies. Where an application is made to the Commission to sanction a compromise or arrangement and is shown that the compromise or arrangement is proposed for the purposes of, or in connection with, a scheme for the reconstruction of any company or companies, or the amalgamation of any two or more companies or division of a company into one or more companies. Under the scheme the whole or any part of the undertaking or property or liabilities of any company concerned in the scheme ("a transferor company") is to be transferred to another company ("the transferee company') or is proposed to be divided among and transferred to two or more companies.
Company Bench of the High Court would exercise SECP powers under section 283 of the Companies Act, 2017. The section 283 deals with the powers of Commission to issue notice to be given to registrar for applications.
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