Law: Companies Ordinance, 1984

Section: 305

(a) Companies Ordinance (XLVII of 1984)---Ss. 305 & 306---Winding up of company-­Conditions to be considered, enumerated. Following is the legal position with regard to conditions to be considered in the case of winding up of a company: -- (i) That if a debtor company is merely unwilling to pay its debts but otherwise is commercially solvent, then the normal remedy available to a creditor is a suit for the recovery of the amount and not a petition for winding up. (ii) That if the Court, finds that the negligence on the part of the debtor company to pay the sum demanded in terms of section 306(1)(a) of the Companies Ordinance, 1984, is not on account of want of commercial solvency, but because of bona tide dispute based on a substantial ground as to the entitlement of the creditor to the amount demanded, application under section 306 read with section 309 of Companies Ordinance, 1984, will not be sustainable. (iii) That section 306(1)(a) of Companies Ordinance, 1984, raises a presumption as to the fact that the debtor company is deemed to be unable to pay its debts, if is spite of the receipt of demand in terms of the above clause, the debtor company neglects to pay the sum demanded within thirty days of the receipt of notice of demand, or neglects to secure or to compound such debt to the reasonable satisfaction of the creditor. But this presumption is rebuttable by the debtor company, if it can show that it is commercially solvent and is in a position to meet its liabilities on due dates. (iv) That the object of sections 305 and 306 of Companies Ordinance, 1984, is not to coerce a debtor company to make payment to an unpaid creditor, but to secure discontinuation of functioning of such company which has ceased to be commercially solvent. (v) That though under section 9(3) of Companies Ordinance, 1984, it is permissible to adopt summary procedure, but the procedure adopted should be fair and just which may ensure equal opportunities to the contesting parties. (vi) That the effect of the lack of proof of service of a demand notice by a creditor in terms of section 306(1)(a) of the Companies Ordinance, 1984, is that the presumption that the debtor company…

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