(12.17.3) Statutory Provisions regarding Compromise or Arrangement

The Act

empowers a company to make compromise or arrangement with its creditors or

members and make suitable provisions under Ss.391 to 393.

Section 391 makes the following provisions:

  1. Where a compromise or arrangement is proposed (a) between a company and its creditors or any class of them; or (b) between a company and its members or any class of them; the court may, on the application of the company or any creditor or member or liquidator order that a meeting of the creditors or members (or any class of them) be called and held in the manner directed by the court.

  2. If at the meeting, a majority of the number representing in value three fourths of the creditors or members (or any class of them) present in person or by proxy agree to the compromise or arrangement, then the compromise or arrangement will be binding on: (a) all the creditor or creditors of the class or all the members or members of the class; and (b) the company or, if the company is being wound up, on the liquidator or contributaries of the company.

  3. The court shall not make any order sanctioning the compromise or arrangement unless it is satisfied that the company or any other party making the application has disclosed to the court, by affidavit or otherwise, all material facts relating to the company, such as: (a) the latest financial position of the company; (b) the latest auditor’s report on the accounts of the company, (c) whether any investigation or proceedings under Ss. 235 to251. are pending against the company, etc.

  4. An order made by the court sanctioning the compromise or arrangement shall have no effect until a certified copy of the same is filed with the Registrar. Moreover, a copy of every such order must be annexed to every copy of the memorandum, issued after the filing of the certified copy of the order or, if the company has no memorandum, to every copy of its constitution.

  5. After an application for compromise or arrangement is made, the court may at any time stay the commencement or continuation of any suit or proceedings against the company on such terms as it thinks fit, until the application is disposed of.