Shams Ul Arifeen

Voluntary Winding Up of TF Technologies As per last Form A made upto 2018 TF Technologies (Private) Limited (“the Company”) is private limited company having its registered office at 1st Floor, TF Complex, 7-Mauve Area, G-9/4, Islamabad with a paid-up capital of 1,000 shares. The Company has only three share-holders and out of which M/s Telecom Foundation is majority while holding 700 shares whereas O.D.C Pakistan (Private) Limited is holding 299 shares and one share held by Transcom (Private) Limited. In order to voluntary winding up of the Company consent of shareholders being lawful owner of the Company is required and majority i.e. 75% shareholders decide in favor of winding up the process for liquidation will commence. In present case we have information of Telecom Foundation the majority shareholder which is charitable organization established under the Charitable Endowment Act, 1980 as a trust for charitable purpose. As per information provided it can safely be stated that the Foundation is an entity independent from Government hence only consent of the Foundation being a majority shareholder would suffice for the purpose of passing special resolution and there is no need to resort to the concerned ministry for seeking approval before consenting for voluntary winding up. Likewise, with reference to two other shareholders, if would be able to access to some corporate record and can access their status as well. Steps for voluntary winding up of a company 1. A company may be wound up voluntarily if the company passes a special resolution to be wound up voluntarily. 2. A special resolution may be proposed in an annual general meeting or the company can call an extraordinary general meeting for that purpose. The directors shall send notice of the general meeting to all the members entitled to vote without any exception. The proposed resolution and relevant documents will also be attached to the notice. 3. Under the Companies Act, 2017 a minimum of 21 days’ notice is required to call a meeting in which a special resolution is placed for the approval by the members. However, if all the members entitled to attend and vote at any meeting agree, a resolution may be proposed and passed as a special resolution at a meeting of which less than twenty-one days’ notice has been given. 4. The resolution requires the approval of three-fourths of the members in the general meeting. 5. The company appoints one or more liquidators in a general meeting. 6. The law requires all companies to file with the registrar a copy of every special resolution when passed in the prescribed form. For this purpose, Form 26 has been prescribed, with a specified procedure. Failure to file Form 26 may invite penal action by the registrar. 7. The process of winding up shall begin at the time of passing the resolution for voluntary winding up. 8. Notice of the resolution must be given within ten days by advertisement in an English and Urdu newspaper. 9. A copy of the notice must be sent to the registrar immediately. 10. Directors must make a declaration of solvency, verified by affidavit, stating the company can pay its debts in full within a year. 11. The declaration must be made within five weeks before passing the winding-up resolution, be delivered to the registrar, contain no intent to defraud, and be accompanied by an auditor's report. 12. The company appoints one or more liquidators in a general meeting. 13. Liquidator’s powers commence upon appointment. Remuneration is fixed by the general meeting, not subject to enhancement but may be reduced by the Court. The liquidator cannot resign before completion without valid reasons and is not entitled to remuneration if the winding-up is incomplete. Opinion on violation of section 158 of the Companies Act, 2017 Section 158 of the Companies Act, 2017 outlines the process for the retirement and subsequent election of directors in a company. It mandates that all directors must retire either on the date of the first annual general meeting or, for subsequent directors, upon the expiry of their term i.e., 3 years. These retiring directors continue performing their functions until their successors are elected. The continuing directors must promptly initiate the election process for new directors and, if any impediments arise, report to the registrar at least 45 days before the due date of the relevant meeting. Meetings for elections should not be delayed by more than 90 days from the due date unless exceptional circumstances beyond the directors' control occur or compliance with a court order is necessary, with the registrar potentially allowing an extension for recorded reasons. If the election process is not completed within the specified period, the registrar has the authority to direct the company to hold an annual or extraordinary general meeting for director elections. This can be done on the registrar's initiative or based on representations from members holding at least one-tenth of the total voting power in a company with share capital or at least one-tenth of the total members in a company without share capital. The registrar will specify the date and time for the meeting in the order. Failure to comply with the registrar’s direction results in the responsible officer or person being guilty of an offence and liable to a fine at level 2 on the standard scale. Previously, the retirement of directors was governed by section 177 of the Companies Ordinance, 1984. According to this section, all directors subject to election would retire on the date of the first annual general meeting, and subsequently, all directors would retire upon the expiry of the term specified in section 180 (3 years). Retiring directors continued performing their functions until their successors were elected and were required to take immediate steps to hold elections. If there were any impediments, they had to report the circumstances to the registrar within fifteen days of the term's expiry as laid down in section 180. TF Technologies (Private) Limited ("the Company") has failed to hold elections for the Board of Directors for two consecutive terms. This failure constitutes a violation of Section 158 of the Companies Act, 2017 ("CA 2017"). In a similar case involving Noor Silk Mills Limited ("the Company") and its directors ("the Respondents"), a Show Cause Notice (SCN) was issued on January 8, 2016, due to the failure to conduct timely elections for the board of directors as required under Section 177 of the Companies Ordinance, 1984 ("the Ordinance"). The last election for the board of directors had been held on October 31, 2008, for a term expiring on October 31, 2011. The Company failed to hold subsequent elections by the due date and did not report any impediments to the Registrar within the stipulated time. Consequently, an order was issued by Abid Hussain, Executive Director of the Corporate Supervision Department, Company Law Division, Securities and Exchange Commission of Pakistan (SECP), imposing a fine of Rs. 10,000 on each of the seven directors, totalling Rs. 70,000. Based on the provisions of Section 158 of CA 2017 and the case involving Noor Silk Mills Limited, it is evident that the failure to hold timely elections for the board of directors is a significant violation. However, it is possible to rectify this non-compliance by paying the prescribed fine to the SECP and subsequently holding the required elections. In light of the above, TF Technologies (Private) Limited can take the following steps: 1. Payment of Fine: The Company should prepare to pay a fine similar to the one imposed in the Noor Silk Mills Limited case. 2. Conduct Elections: Immediately initiate the process to hold elections for the new board of directors. 3. Voluntary Winding Up: After rectifying the non-compliance by holding the elections, the Company can proceed with the voluntary winding-up process.