Liquidation of Company
37. Liquidation of company on issuance of order for liquidation:
(1)Where the Court makes an order to liquidate a company pursuant to this Act, the Court shall make an order to appoint one person as the liquidator, from amongst the persons who are entitled to carry on insolvency business at
the time of making of such order.
(2) Following the making of order pursuant to Sub-section (1), the liquidation proceedings of the company shall be deemed to have commenced.
38. Consequences on the commencement of liquidation proceedings:
(1) On the commencement of the liquidation proceedings of any company, the following provisions shall govern the following matters in relation to such company:
(a) Where the director and officer of the company are relieved of office, the liquidator shall exercise all such powers as may be exercisable by the director and officer of the company in relation to the management of that company;
(b) The liquidator shall take in his or her custody and control all assets, accounts and books of account of the company, except the properties in possession of secured creditors;
(c) Except as ordered otherwise by the liquidator, the service of all employees appointed by the company shall terminate.
(2) The provision relation to ipso facto suspension set forth in Section shall, except for the following matter, apply during the period of currency of liquidation proceedings:
(a) Implementation of the right of secured creditors to execute pursuant to this Act; or
(b) Implementation of the right of the lessor of any property leased to the company to redeem the property pursuant to this Act.
39. Conversion of liquidation of company into restructuring program:
(1)Where, based on the study and examination of the business and assets of the company, nature of the goods or services to be produced by the company and market potentiality thereof, the liquidator thinks that the restructuring
program of the company can be adopted by a meeting of creditors and approved, the liquidator may make an application, accompanied by the reasons, to the Court for an order to keep pending the order on liquidation of
company issued by the Court pursuant to this Act for a certain period of time and to implement the restructuring program pursuant to this Act.
(2) Where the Court is satisfied with the contents of the application received pursuant to Sub-section (1), it may issue an order to suspend the order on liquidation of a company issued previously for any certain period of time and implement the restructuring program.
(3) Where an order is issued pursuant to Sub-section (2), the order shall be implemented pursuant to this Act.
40. Functions, duties and powers of liquidator:
(1) The functions, duties and powers of the liquidator in addition to the other provisions set forth in this Act shall be as follows,:
(a) To institute or defend any case or legal action on behalf of the company;
(b) To appoint employees to assist in the discharge of his or her functions;
(c) Where any installment on any share of the company is due, to make a call on the shareholder for payment of such installment;
(d) To do and execute, or cause to be done and executed, all such acts and deeds or documents as required to be done and executed on behalf of the company and in the name of the company and use the seal of the company for that purpose;
(e) To borrow loans against security of the assets of the company;
(f) Where the liquidator considers that the sale and disposal of any property or termination of any contract or liability will render benefits to the company, to sell and dispose of such property or terminate such contract or liability;
(g) To enter into compromise with any creditor of the company or any person who claims to be a creditor of the company in relation to the claim made by such creditor or person;
(h) To enter into compromise with any person against whom the company may make a claim in relation to any loan, liability or any other claim;
(i) To sell the assets of the company and distribute the proceeds of such sale pursuant to this Act; and
(j) To perform, or cause to be performed, all such other acts as may be necessary to liquidate the company.
(2) It shall be the duty of the liquidator to perform the following functions, in addition to those set forth in Sub-section (1):
(a) To collect, protect and sell the assets of the company;
(b) To examine the business and financial situation of the company;
(c) To accept debt claim of any creditor subject to Chapter-6;
(d) To distribute the proceeds of sale of the assets of the company subject to the order of priority determined for the payment of liability pursuant to this Act;
(e) To call and conduct the meeting of creditors;
(f) To prepare a report on his or her acts and actions and present it to the Court and the Office;
(g) To facilitate the cancellation of registration of the company; and
(h) To examine or inquire into whether any director or employee or shareholder of the company or any person has committed any fraud, cheating or deception against the company or its creditors and institute necessary legal action against such person.
(3) In addition to the functions, duties and powers set forth in Subsection (1) or (2), the liquidator may also perform other functions such as to get back any property of the company if such property is used by any person or to institute legal action to get back such property or amount involved in a void transaction. Provided that the liquidator shall not be entitled to make such expenses as may not be payable from the assets of the company.
(4) Even though the company does not have adequate amount to pay necessary expenses or remuneration to the liquidator for the exercise of the powers or performance of the duties set forth in Sub-section (1), (2) or
(3), the liquidator shall exercise such powers and perform such duties.
(5) Where the liquidator faces any difficulty with the exercise of any power or the performance of any duty pursuant to this Chapter, the liquidator may make an application to the Court for the removal of such difficulty; and where an application is so made, the Court may, if it holds the application to be reasonable, remove difficulty.
41. Money to be lent by creditor:
(1) Where any act to be done by any company which has become insolvent may render or yield benefit or advantage to the creditors, any creditor of such company may advance money to the liquidator to do such act.
(2) Any amount borrowed pursuant to Sub-section (1) shall be paid from the amount received from such act.
(3) Any creditor may make an application to the Court for any order for making payment of a debt claim accepted by the company from the amount received pursuant to Sub-section (1).
(4) Where an application is made pursuant to Sub-section (3), the Court may, if it considers reasonable that such loan can be repaid from the amount referred to in Sub-section (1), make an order for that purpose.
42. Report to be submitted by liquidator:
(1) The liquidator shall prepare a progress report on the proceedings carried out in relation to the company and
submit it to the Court and the Office no later than three months after the date of his or her appointment.
(2) The report submitted pursuant to Sub-section (1) shall state the following matters, in addition to other matters:
(a) The amount of issued capital of the company, capital that the shareholders have undertaken to subscribe and paid-up capital;
(b) Estimated value of the assets and liabilities of the company;
(c) Opinion of the liquidator in relation to the reason for financial failure of the company;
(d) Opinion of the liquidator on the need to further examine or inquire into the promotion, incorporation of the company or the affairs of the company and its directors and shareholders;
(e) Such other necessary matters as the liquidator considers appropriate.
43. To call meeting of creditors:
(1) The liquidator shall, prior to preparing his or her report pursuant to Section 42 and thereafter from time to
time as per necessity, call a meeting of creditors of the company.
(2) A meeting of creditors shall be called pursuant to Sub-section (1) by fulfilling the requirements set forth in sub-sections (2) and (3) of Section 21.
(3) The liquidator shall chair the meeting of creditors.
(4) The provisions of Section 24 shall apply, mutatis mutandis, to the other matters relating to the meeting of creditors.
44. Power to form committee of creditors:
(1) A meeting of creditors held pursuant to Section 43 may form a committee consisting of a maximum of five creditors in order to assist the liquidator in relation to the liquidation of the company.
(2) The scope of work of the committee formed pursuant to Subsection (1), rules of procedures relating to its meeting or other necessary matters shall be as specified by the meeting of creditors at the time of its formation.
45. To give time limit for submission of debt claim:
(1) The liquidator shall give a notice with the time limit of fifteen days to all creditors of the company which has become insolvent to submit their respective debt claims in the prescribed format.
(2) The notice given pursuant to Sub-section (1) shall be published at least twice in a newspaper of national circulation.
(3) The liquidator may reject any claims of the creditors who have not made claim within the time limit referred to in Sub-section (1). Provided that where any creditor makes an application, accompanied by the reason for failure to submit his or her claim within that time limit, to the liquidator, the liquidator may accept such claim if the contents of such application are found reasonable.
46. Power of the Court to make order in relation to liquidation of company:
Notwithstanding anything contained elsewhere in this Chapter, the Court may at any time issue the following order in respect of any company which is undergoing liquidation proceedings:
(a) To suspend or terminate the liquidation of the company;
(b) To require to hand over the assets of the company to the liquidator;
(c) To pay any call made for payment of installment;
(d) Where there is a doubt that any person is possessing or using any property of the company, to stop such possession or use; or
(e) To arrest any person who causes any hindrance in or obstruction to the performance of functions or duties or the
exercise of powers by the liquidators.
47. Cancellation of registration of company:
Any liquidator appointed to liquidate any company pursuant to this Chapter shall, while liquidate the company, cancel the registration of the company by following the procedures determined by this Act or by other laws in force.