Question1: Mega Projects Limited is presently facing financial crunch.

In order to overcome
this crisis and to improve profitability, the Board of Directors is considering raising funds
through capital injection. The existing shareholders and the potential investors may not be
willing to invest at par value which is Rs.10 per share. However, it is estimated that the company
could get just about Rs.7 per share. The directors have therefore decided to issue shares at
discount. Being a Company Secretary, You are required to advise the directors about the
procedure to be followed in this regard, under the Companies Ordinance, 1984.

Answer:
Power to issue shares at a discount: (section 84)
(l) Subject to the provisions of this section, it shall be lawful for a company to issue shares in the
company at a discount. Being a company secretary, according to companies ordinance MPL
should follow the following procedure.
(a) The issue of the shares at a discount must be authorized by resolution passed in general
meeting of the company and must be sanctioned by the Commission
(b) The resolution must specify the maximum rate of discount at which shares are to be issued
(c) Not less than one year must at the date of issue have elapsed since the date on which the
company was entitled to commence business
(d) The share to be issued at a discount must be issued within sixty days after the date on which
the issue is sanctioned by the Commission or within such extended time as the Commission may
allow
(2) Where a company has passed a resolution authorizing the issue of shares at a discount, it may
apply to the Commission for an order sanctioning the issue; and on such application the
Commission may, if, having regard to all the circumstances of the case, it thinks proper so to do,
make an order sanctioning the issue on such terms and conditions as it thinks fit.
After passing the resolution MPL should sanction issue order from commission
(3) Issue of shares at a discount shall not be deemed to be reduction of capital

(4) Every prospectus relating to the issue of shares, and every balance sheet issued by the
company subsequent to the issue of shares, shall contain particulars of the discount allowed on
the issue of the shares or of so much of that discount as has not been written off at the date of the
issue of the prospectus or balance sheet.
(5) If default is made in complying with sub-section (4), the company and every officer of the
company who is in default shall be liable to a fine not exceeding two thousand rupees.

Question2: A foreign investor had acquired majority shares in Marine Steel Services Limited
(MSSL) in the year 2006. Due to global recession, MSSL has incurred heavy losses and a major
portion of its equity has been wiped out. Consequently, the investor intends to wind up the
operations of the company voluntarily.
(a) In the light of Companies Ordinance, 1984, advise the management as regards the following:

(i) When would the voluntary winding up process be deemed to commence and what would be
its effect on the operations of MSSL.
Answer:
A voluntary winding up shall be deemed to commence at the time of the passing of the resolution
for voluntary winding up. I
Effects:
in the case of voluntary winding up, the company shall, from the commencement of the winding
up, cease to carry on its business, except so far as may be required for the beneficial winding up
thereof:
Provided that the corporate state and corporate powers of the company shall, notwithstanding
anything to the contrary in its articles, continue until it is dissolved
(ii) How could the directors ensure that the requirements of making a declaration of solvency
have been compiled with?
Answer:

(1) Where it is proposed to wind up a company voluntarily, its directors, or in case the company
has more than three directors, the majority of the directors, including the chief executive, may, at
a meeting of the board of directors make a declaration verified by an affidavit to the effect that
they have made a full inquiry into the affairs of the company, and that having done so, they have
formed the opinion that the company has no debts, or that it will be able to pay all its debts in full
within such period not exceeding twelve months from the commencement of the winding up, as
may be specified in the declaration.
(2) A declaration made as aforesaid shall have no effect for the purposes of this Ordinance,
unless(a) it is made within the five weeks immediately preceding the date of the passing of the
resolution for winding up the company and is delivered to the registrar for
registration before that date; and
(b) it is accompanied by a copy of the report of the auditors of the company, prepared, so
far as the circumstances admit, in accordance with the provisions of this
Ordinance, on the profit and loss account of the company for the period
commencing from the date up to which the last such account was prepared and
ending with the latest practicable date immediately before the making of the
declaration and the balance-sheet of the company made out as on the last
mentioned date and also embodies a statement of the company's assets and
liabilities as at that date.
(3) Any director of a company making a declaration under this section without having reasonable
grounds for the opinion that the company will be able to pay its debts in full within the period
specified in the declaration shall be punishable with imprisonment for a term which may extend
to six months, or with fine which may extend to ten thousand rupees, or with both.
(4) If the company is wound up in pursuance of a resolution passed within the period of five
weeks after the making of the declaration, but its debts are not paid or provided for in full within
the period specified in the declaration; it shall be presumed, until the contrary is shown, that the
director did not have reasonable grounds for his opinion.
(5) A winding up in the case of which a declaration has been made and delivered in accordance
with this section is in this Ordinance referred to as "a members' Companies Ordinance, 1984 246

voluntary winding up", and a winding up in the case of which a declaration has not been so made
and delivered is in this Ordinance referred to as "a creditors' voluntary winding up".

(b) In order to minimize the winding up expenses, the board wants to appoint one of the directors
as the liqudator, on a monthly remuneration of Rs. 50,000. Advise the board as regards the
requirements of Companies Ordinance, 1984 with respect to the appointment and remuneration
of liquidator, in the above situation
Answer:
.(1) The company in general meeting shall appoint one or more liquidators, whose written
consent to act as such has been obtained in advance, for the purpose of winding up the affairs and
distributing the assets of the company.
(2) The liquidator or liquidators shall be entitled to such remuneration by way of percentage of
the amount realized by him or them by disposal of assets or otherwise, as the company in general
meeting may fix having regard to the amount and nature of the work to be done and subject to
the prescribed limits:
Provided that different percentage rates may be fixed for different types of assets and items.
(3) In addition to the remuneration payable under sub-section (2), the company in general
meeting may authorize payment of a monthly allowance to the liquidator for meeting the
expenses of the winding up for a period not exceeding twelve months from the date of the
commencement of winding up.
(4) The remuneration fixed as aforesaid shall not be enhanced subsequently but may be reduced
by the Court at any time.
(5) If the liquidator resigns, is removed from office or otherwise ceases to hold office before
conclusion of winding up, he shall not be entitled to any remuneration and remuneration already
received by him, if any, shall be refunded by him to the company.
(6) On the appointment of a liquidator all the powers of the directors, chief executive and other
officers shall cease,
(7) No remuneration shall be payable to liquidator who fails to complete the winding up
proceedings within the prescribed period.

Question3: Substantial operating losses sustained by Legend Ceramics Limited (LCL) have
forced its directors to proceed for companys voluntary winding up. Accordingly, a general
meeting of LCL was held on July 1, 2010 and Mr. Ateeq was appointed as the Liquidator. In the
context of provisions contained in the Companies Ordinance, 1984 you are required to explain
the following:
(a) The steps that Mr. Ateeq should take if the winding up is not completed till June 30, 2011.
(b) Mr. Ateeqs responsibilities as regards final meeting and dissolution of the company.
Answer (B)
(1) Subject to the provisions of section 371, as soon as the affairs of the company are fully
wound up, the Mr. Ateeq shall(a) make up a report and account of the winding up, showing how the winding up has
been conducted and the property of the company has been disposed of and such
other particulars as may be prescribed; and
(b) Call a general meeting of the company for the purpose of laying the report and
account before it, and giving any explanation thereof.
(2) The account referred to in clause (a) of sub-section (1) shall be audited and a copy thereof
together with a copy of the auditor's report and notice of meeting shall be sent by post to each
contributory of the company at least ten days before the meeting required to be held under this
section.
(3) The notice of the meeting specifying the time, place and object of the meeting shall also be
published at least ten days before the date of the meeting in the manner specified in sub-section
(1) of section 361 for publication of a notice under that sub-section.
(4) Within one week after the meeting, the liquidator shall sent to the registrar a copy of his
report and account, and shall make a return to him of the holding of the meeting along with the
minutes of the meeting in the prescribed manner.
(5) If a quorum is not present at the meeting, the liquidator shall in lieu of the return referred to
in sub-section (4), make a return that the meeting was duly summoned and that no quorum was
present thereat, and upon such a return being made within one week after the date fixed for the

meeting along with a copy of his report and account in the prescribed manner, the provision of
sub-section (4) as to the making of the return shall be deemed to have been complied with.
Companies Ordinance, 1984 251

(6) The registrar, on receiving the report and account and either the return mentioned in subsection (4) or the return mentioned in sub-section (5), shall, after such scrutiny as he may deem
fit, register them, and on the expiration of three months from such registration, the company shall
be deemed to be dissolved:
Provided that, if on his scrutiny the registrar considers that the affairs of the company or the
liquidation proceedings have been conducted in a manner prejudicial to its interest or the
interests of its creditors and members or that any actionable irregularity has been committed, he
may take action in accordance with the provisions of this Ordinance:
Provided further that the Court, may on the application of the liquidator or of any other person
who appears to the Court to be interested, make an order deferring the date at which the
dissolution of the company is to take effect, for such time as the Court thinks fit.
(7) It shall be the duty of the person on whose application an order of the Court under the
foregoing proviso is made, within fourteen days after the making of the order, to deliver to the
registrar a certified copy of the order for registration, and, if that person fails so to do, he shall be
liable to a fine not exceeding one hundred rupees for every day during which the default
continues.
(8) If the liquidator fails to comply with any requirements of this section, he shall be publishable
with fine which may extend to five thousand rupees and, in the case of a continuing failure, to a
further fine which may extend to one hundred rupees for every day after the first during which
the failure continues.