Senate passes Corporate Rehabilitation Bill

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Senate passes Corporate Rehabilitation Bill

Post by admin » Thu Mar 08, 2018 6:04 pm

ISLAMABAD, March 7: The Senate has passed the amended Corporate Rehabilitation Bill,
2018. It provides mechanism for rehabilitation of the distressed companies, which is need of the
hour for sustainable growth of corporate sector.
Its salient features are: specification of High Court for rehabilitation of distressed companies,
extensive plan of rehabilitation in relation to debtor, petition can be filed by qualified creditors
and debtors for order of mediation, appointment of insolvency experts to mediation through sole
mediators or joint mediators appointed by the court, notice of order of mediation shall be sent to
all interested parties by the petitioner, appointment of administrator of the debtor and its
responsibilities, plan of rehabilitation to be filed with the court, statement of affairs of debtor to
be filed in court, confirmation and implementation of rehabilitation plan, dismissal of the case by
the court.
The bill is a part of extensive legislative plan being made for restructuring and rehabilitation of
distressed and sick corporate entities of the country with consensus of all relevant stakeholders.
The first part of the legislation has already been enacted which is titled as “Corporate
Restructuring Companies Act, 2016” on July 1, 2016.
Sheikh Aftab Ahmad, the Minister for Parliamentary Affairs, moved the bill on behalf of the
State Minister for Finance and Revenue, Rana Muhammad Afzal Khan.
Originally, the Senate passed it in September 2017. In January 2018, the National Assembly
passed it with certain amendments. So, it was again introduced in the Senate on February 15,
2018 and, was referred to the Standing Committee on Finance, revenue, Economic Affairs and
Narcotics Control. The chairman of the Senate Standing Committee, Senator Saleem
Mandviwalla, approved the amendments made by the National Assembly, which resulted in the
passage of long-awaited law for the rehabilitation of distressed corporate entities.
The existing institutional arrangements and legal process for revival and rehabilitation of
distressed companies are inadequate and time consuming. In the past efforts were made on the
said law, which resulted in an imbalance of legal remedies for rehabilitation of debtors and
protection of creditors. Therefore, a comprehensive legal framework is urgently needed to
rehabilitate the distressed companies and businesses in the country.
Source: SECP

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Re: Senate passes Corporate Rehabilitation Bill

Post by sana1 » Thu Mar 08, 2018 7:18 pm

Very good step by Govt.

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Re: Senate passes Corporate Rehabilitation Bill

Post by admin » Mon Mar 12, 2018 6:34 am

[Introduced on 19-O1-2O17]
AS rEO# INTRODUCED IN THE SENATE]
A
B ILL
lo provide for rehabililation and re-organisation of distre-ssed corporate entities
\l'HERE.\S it is expcdicnt to providc lirr rehabilitation and re-organisation of
distressed corporate entitics and their business so as to cncourage economic groMh and
development:
It is hereby enacted as tbllorvs:-
L Short title, cxtent and commenccment.-( l) This Act shall be called the
Corporate Rehabilitation Act. 20 lp.
(2) lt extends to the u,hole ofPakistan.
(3) tt shall come into fbrce at once.
CHAPTER I
Preliminary
2. Definitions.-( l) In this Act, unless there is anything repugnant in rhe
subjecl or context,-
(a) "administrator" means an administrator appointed under section
20
(b) "administration committee" means committee of creditors or
sharel.rolders of debtor appointed under seclion 26;
(c) "claim" or "dcbt" means right to paymenl, whether or not such
right is reduced to judgtrent, liquidated. unliquidated, fixed,
contingenl. matured, disputed, undisputed, legal, secured or
unsecured and includes principal amount and any mark-up, profit,
return and otlrer charges;
(d) "Commission" means the Securities and Exchange Commission of
Pakistan established under the Securities and Exchange
Comrnission of Pakistan Act, 1997 (XLll of I 997);
(e) ''Court'' means the High Court having territorial jurisdiction;
(l) "creditor" means an entity that has a claim against debtor that
arose at the time of or before the commencement of a case under
this Act:
(g) "debtor" means a company specified under section 6;
2
"financial institution" shall have lhe same nreaninq as assigned to
it under the lrinancial Institutions (Recovery of Finances)
Ordinance, 2001 (XLVI ol200l);
"insolvencv expert" means the expert specified under section 5;
"interests" or ''class of interests" means any person or class of
persons liable lo contribute to the assets rrf a companl in thc evenl
of its being n'ound up and includes the holder of anl, shares rr hich
are fully paid upt
"mediator" means the mediator appointed under seclion l0:
"Ordinance" means rhe Companies Ordinance. 2016 (Vl of 2016)
or such other larv in force lor regulations ol'corlpanies;
"order of mediation" means the order passed bv the Court under
section l0;
"plan of rehabilitation" means a plan of rehabilitation of debtor
defined under section 7:
"prescribed" means prescribed by rules or regulations made under
this z\ct;
"property" means property of all description, rvhether movable or
immovable, tangible or intangible. existing or future, claims for
money, cash, and includes instruments that evidence title in
property;
"qualifying creditors" rneans one or more creditors hotding unpaid
and overdue claims for an aggregate amount of not lcss than twothird
of the value of assets of the debtor as pcr its larest halance
sheetl
"regulations" means regulations made urrder this Act;
"rules" means rules made under this Act;
"security interest" means a charge, mortgage, lien, hypothecation,
pledge, assignment or any other encumbrin"" ou"r u p-p"ny,
"State Bank" shall have the same meaning as assigned to it under
the State Bank ofpakistan Act, 1956 (XXit of liSO); and
"statement of aflflairs" means statement of particulars about the
property and business ofa debtor prepared under section 9.
(2) lhe words and expressions used but not defined i. this Act srra[ have the
sarne rneaning as assigned to them in the Ordinance.
(h)
(i)
0)
(m)
(n)
(o)
(p)
(k)
(l)
(q)
(r)
(s)
(t)
(u)
(v)
3. .Iurisdiction and powers of High Court._{ l) The Courr having jurisdiction under this Act shall be the Iligh Court havirrg.lurisdiclion over the place al
rvhich the registered otfice of the debtor or. as the case mav be. the principal place of
business of the debtor is situated.
(2) Subject to the provisions of this Acr. the Court shall_
(a) in'exercise of its civil .lurisdiction. have all the porvers vested in a
civil court under lhe Codc ol Civil Procedure. 1908 (Act V of
1908):
in exercise of its criminal .jurisdiction, have all the porvers vested
in a court exercising .iurisdiction under the Code of Criminal
Procedure. 1898 (Act V of 1898); and
in exercise of its companl. jurisdiction, have all the porlers vested
in a court exercisinu j urisdiction under the Orclinance.
(b)
(c)
(3) Notwithstanding anything co.tai.ed in a.v other larv. all rnatters coming
before the court under rhis AcI shall bc disposed of expeditiously and final judgmeni
shall be pr.nounced as soon as nray be practicable and. except in extraorJinary
circumstances, the Court shall hear the case on da1'to day basis.
4. Appeal and revierr,,- {l) An appeal shall lie. al the instance olany person
aggrieved bv an order made by a Judge of the High Court in the exercise of the
jurisdiction conferred by this Act, in the sanre rvar,and subject to the same provisions as
an appeal lies against an order passed by a single Judge oflhat court in exercise of its
original civil j urisdiction.
(2) -fhe Court mav review, rescind or varl any order ntade by it under this Act.
5. Insolvency experts.{l) The Commission shall, in consultation rvith the
state Bank. maintain a panel of insolvencv experts *ho shall be professionals having a
minimum experience of fifteen vears in the lield of accountancy, banking. finance. law.
rnanagement and sound knowledge ol-insolvencv practices of the country.
(2) An insolvency expen shall. lor due pcrfornrance of his lunctions under this
Act, be cntitled to such remunerations and privilcges as may be prescribed by regulations.
(3) 'l he Commission may, b1, regulations. prescribe the code of conduct for the
panel of insolvency experts to be appointed under this Act and organize training, capacity
building and accreditation programmes lor prolessional developmcnt of such insolvenc;,
experts.
CHAPTER II
Rehabilitation of Debtor
6. Debtor.-A debtor shall be a company incorporated or registered under the
Ordinance or previous companies legislation and shall not include--
(a)
(b)
4
a flnancial institution:
a company engaged in the business of insurance as dclined in
clause (xxvii) of section 2 of the Insurance Ordinance. 2000
((XXxx of 2000);
a contpany rvhich has debts of less than hundred million Rupees or
such otheTsum as the Federal Government may. bt' notification in
the olficial Cazette, specily from time to time;
a company against which an order of dismissal under section l7
has been passed within the past five years;
a company with respect to which a plan of rehabilitation has been
confirmed under this Act r.vithin the past seven vears:
a company against u,hich a rvinding up ordcr has alreadl. becn
passed;
a company which has resolved by special resolution that such
company be wound up voluntarily;
a company against which execution proceedings arc pending for
satisfaction of one or more decrees for an aggregate sum not less
than twenty-five percent of the value of its assetsl or
a company which has availed relief under.tlre BpD Circular No. 29
of2002 issued by the State Bank.
of rehabilitation.--( I ) A plan of rehabilitation shall specify the
in relation to a debtor,-
claims and classes of claims against the debtor;
interests and classes of irrterests in the debtor:
claims and interests belonging to the debtor;
claims or interests that will not be impaired under. the plan of
rehabilitation;
claims or interests that will be impaired under the plan of
rehabilitation;
places of business of the debtor, details of its assels and anv
security interests created over such assets,
particulars of shareholders, directors and key management of the
debtor; and
scheme of implementation of plan of rehabilitation of the debtor.
(c)
(i)
7. Plan
ftrllorving matters
(a)
(b)
(c)
(d)
(e)
(f)
(g)
(h)
(d)
(e)
(t)
(g)
(h)
)
(2) Subject to sub-section (l). a plan of' rehabilitarion rna1, provide fbr the
fbllo$.ing matters. in relation to a debtor.-
(a) the setllement. restructuring or rescheduling of any claims or
interests or classes of claims or interests;
,!O) the change olownership and managanenr olthe debtor;
(c) the sale of all or anl assets ol the debror and the distribution of
proceeds of such sale among holders of claims or interests;
(d) the assumption, rejection or assignment of any executory contract
or unexpired lease ofthe debtor;
(e) the enforcement ofany claims or inrerests belonging to the debtor:
and
(0 any other matter concerning rehabilitation of tlre debtor or
distribution of proceeds of sale of propertl, of the debtor.
8. Commencement of a case.{l) A debtor may file a petition in the Court for
an order of mediation. rvhich shall be supported by a plan of rehabilitation and special
resolution of the debtor approving the plan ol rehabilitation.
(2) The qualifying creditors may file a petition in the Court for an order of
rnediation against a debtor.
(3) On first date ofhearing, the Court shall issue notice to the parties listed in the
petition through.-
(a) registered post, acknowledgement due:
(b) courier service; and
(c) publication in one English language and one Urdu language daily
newspaper of wide circulation in the courrtry.
and service duly effected in any one of the aforesaid modes shall be deemed to be valid
service tbr the purposes of this Act.
(4) The notice issued under sub-section (3) shall specify a dare ol hearing not
later than twenty-one days after completion of the service.
(5) Any person interested of filing a written reply to the petition shall do so at
least three days prior to the hearing and supply a copy ofsuch reply to the party that filed
the petition.
(6) The Court may, where a prima.facie case has been made out by the qualifying
creditor for an order of mediation in relation to a petition filed under sub-section (2),
direct-
6
(a) tlic debtor to subrnit. ivithin fifieer.r da1s. the statement of at-fairs in thc
Court: and
(b) the qualif_ving creditor to submit, u,ithin thirty days afier submission ol
the stalement of aflfairs, a plan of rehabilitation of the debtor in the
L orlrt.
9. Stalemerrt of affairs. (l) fhe $atcrncnr of aflairs ofa dehtor shall bc rcrifir'J
hr an al'lidarit ol'the cliie l' executive offlcer or a director of thc dcbtor and shall conlain
the lollos inc particulars. narnclv:
(a) the assets. debts and Iiabilities ofthe debtor:
(b) the particulars of the creditors, stating separalell, the amount of
secured debts and unsecured debts and in the case of securcd dcbtsparticulars
of the securities given, their value and the dates u;hen thet
rr crc t ir L'n:
(c) the debts due to the debtor and the particulars ol the persons front
"rhom sucl.r debts are due and the amount likell, to be realizcd
therelronr:
(d) rrhere an),property ofthe debtor is not in its custody or possession. the
place u,here and the person in whose custody or possession such
propertv is:
(e) firll address of the places where the business of the dcbtor u,as
conducted duling six months preceding the relevant date and the
nar.nes and particulars of the persons in charge of the samel
(t) details of any pending suits or proceedings in which the debtor is a
part\.:
(g) latcst l,lulllically disslosed accounts and the last audited accounts: and
(h) such other particulars as may be prescribed by regulations or as thc
Cou may by order require.
(2) Wroerer ir.rtentionally files a statement of affairs',r,hich is falsc in material
particulars or falsell, denies his signature on any document betbre the Court, or fails to
file thc sratement ol affairs rvithout just excuse when so ordered by the court, shall be
guiltv ofan oltbnce punishable
"r,ith
imprisonment ofeither description for a term rvhich
mar extend to six uronths. or rvith fine, or with both.
10. Mediation.--(1) The Court may, after notice and a hearing of tlte petition
tiled ur.rder section 8. pass an order for the appointment of insolvency expeds to act as
sole mediator or .ioint mediators, as the case may be, in relation to tl.re plan of
rehabilitatiorr filcd irr the Corrrt.
7
(2) 1he mediator appointed b' the Court sha carry out mediation ber\veen the
dcbtor a.d creditors or diflerent classes of creditors to achieve acceptance ol the pla^ of
rehabilitatiorr. rvhether rvith or without an1, rnod ilications.
(3) l:or due discharge of his functions under this Act, a mediator shall have the
tbllorting powers:-
(a) to hold sepmate meetings of shareholders or the dchtor and creditors or
different classes of creditors:
(b) to in'ite, scrutinize and determine craims and interest aeainst the debtor;
(c) to determine security interests created over lhe debtor,s assctsl
(d) to determine the debtor's assets available for satislaction ofthe craims of
the creditorst
(e) to carry out varuation of the assets of the debtor through professional
experts approved by the State Bank; and
(f) any other power given by the Court, either on its orvn accord or on
application of the mediator, to carry out the functions under sub-seclion
( l).
(4) A mediator sharl, f,rom the date of his appointment. subrnit monthry progress
reports and may refer any matter to court ror appropriate directions including fol the
purposes of(a)
production ofany records or property olthe debtor in possession ofany
person; and
(b) examination and attendance ofanv person concerned lvith affairs ofthe
debtor.
(5) The person filing the petition sha[ provide necessar], runds to alrorv the
mediator lo perform the functions under this Act and. rvhere required, the mafter may be rclclrcd to the Courl for necessary directions in this regard.
I l. Notice of order of mediation.{l) The person firing the petition under this
Act shall pmvide the notice of the order of mediation to all interested parties within three
davs of the order through(a)
registered post, acknowledgement due;
(b) courier service; and
(c) publication in one English language and one Urdu language daily newspaper
of wide circulation in the country;
8
and scr\ice dull etlectcd in arrl one ol'thc albresaid modes shall be dccnted to be valid
scrvice tbr thc purposes of this r\ct.
(2) 'lhe notice' of order of mediation shall specify the appointment of rnedialor
and fbr filine of anl. claims against. and interests in, the debtor with the mediator r.vithin a
peliod ol lirurteen dal,s o I publication ol notice of the order of mediation.
I l. Star of actions against rlebtor.-( l) In a case comurenccd undcr rhis Act.
thc Court ll.l.l\ . on an application rnade to it by the debtor or an interested person, pass an
order afier rlotice and a hearins for(a)
preservatiou ol'assels of the debtor in such manner as the Court may
dcem lit in circurrstance of the caset and
(b) protcction ol'thc debror or its shareholders, directors and guarantors,
Against anr immincnt adr t-rse ection. tneasure. process or proceeding comrrenced to
recovcr a clainr against the dchtor or its shareholders, directors and guarantors through
sale. transler. reposscssion ()r rnongage of assets of the debtor or its shareholdersdirectors
and !:,uarantors. or [r1 creating an1" rights or interests in relation to such assets.
(2) .l'he
stay granted under sub-section ( I ) shall, if not earlier vacated, ipso facto
cease to havc ellect on--
(a) thc contirmation ola plan under section l4; or
(b) the dismissal olthe case under seclion 17.
(3) Nohvithstanding anything contained in sub-section (2), the Court may, on
application ol- the qualifl.'ing creditors or an interested party and after notice and a
hearing. grant suclr reliel'frorn the stay granted under sub-section ( l) as may be necessary
to prcvent irrcparable halnr or loss to tltc intcrcst ofthat pany.
13. Acceptance of plan of reha bilitation.{ I ) The acceptance or rejection of a
plan of rehabilitation shall not be solicited lrom a holder ola claim or interest unless such
holder is first provided rvith a cop)' of the plan.
(2) A class ol'crcditors shall be deemed to have accepted a plan of rehabilitation
if such plan is acceptcd b1' the crcditors holding at least two-thirds in value ol such class.
(3) A class ()l'inrercsts of the debtors shall be deemed io have accepted a plan of
rehabilitation il'suclr plan is accepted by holders ofat least two-thirds in value olinterests
of such class.
(4) A class tlral is not impaired under a plan of rehabilitation and each holder of
a claim or iutcrest of such class are conclusively presumed to have accepted the plan and
solicitation of acceptance *'ith respect to such class from the holders of claims or
interests of such class is not required.
9
l-1. confirmation of a pran of rchabiritation. l r) I'hc court ma\,. afier norice
and a hearing- c.,tlrm a plan ol rehabiritatio, ir'the plan is in accordancc ,r,ttr ttrc
pror isions ot'this Act and.-
(a) T.vith respect to each class of claims or interests. __
such class has accepted the plan: or
suclt class is not irnprir.ed under lhc plarr: lnd
(i)
( ii)
(b) except to the extenl that the holder of a particular claim has
agrecd to a dillerent treatmerlt ol such clairn. the plan provitles
that the holder of such claint rvill receive cash equai to thc
allor.r,ed amount of such claim.
.
(l) [he provisions ofa plan of rehabiritati.n confirnred bl,the court bind rhc dchtrr- anr entitr issuing securities under lhe pran- an-r, entitl. acquiring properrr: unde:r
tlrc pla'and an'crcditor or shareholder ofthe Jebt.r. u,hether or not the ciaim or interest ol'sLrch crcdito. or srrareholder is impaired under the plan and rvhcther o,ot such crcditor or slrareholder has accepted the plan.
t -.1 ) ['he c.urt ma1' refuse to confirnr a pran if the principar purpose oI thc pran is
rr oidancc. ol laxr--s. duties and fiscal charges levied under larv.
I5 lrnplementation of plan of rehab*itation,-( r) The court mav. on thc
iT.!:i'-,1,, jlf lhe
debtor or qualifying creditors and afrer noiice and u t
"u.ing.
pu.., ,u.1,
:1i.,-...",1111:,l:
deenrc'd appropriate for..the
-purposes
of implementation of ihe plan ol lcnir.rrrrrlron and ar))' person responsible for carrying out the pran or any part thereor' shall contplr riith such directions.
(l) I-he c--ourt may direct the debtor and any other necessarv part),to execute or deli'er or to join i, the e-xecution or derivery oi any instrunrent requiied ro erfect a
IIarr:tel ol'P|opert\ dealr rvith by a plan of rehabilitation contlrmed bri the Court and L0 pe'rfirrnr anr other act, incruding the satisfaction orany charge. ,r,"t ir- ""."*r.,'ri. ,r,.,
corrsum rr::rliotr ol the charge.
1 6. Ii.'ocation of confirmation of a plan of reha bilitation._{ l) The Court nrar'. on the application of any person aggrieved by the pran of rehabiritation. at urr, ,i,n" rrithin trvelrc months of the date ol Confirmation of the plan "rd ,ft;; ;;i;;;; ;
hr-aring-. make an order upon such terms as the Court rhinks fit decraring trr. .",iiir,"rti"" to havc bccn void.
-
(2) Ihe Courl may pass an order under sub_section (l) il tlre order of confinration to be declared void r.ras procured by flraud.
(l) .{n order under this section revoking an order of contirmation shalr provide
tbr all such ,reasures as are necessary_to protecian' entitl, rvhich t ur u"qri."J .igh; i; good laith reliance on the order olconfirmation.
17. l)ismissal of a case.-{l) Mtwithstanding anything to the contrary in rhis Act. the court ma\'. on the application ofany person cinceined ivirh the debtor or on its
t0
own accord- disnriss a case or nra\ suspcnd all proceedings in a case under lhis Act at any
time- if the Court detcrmines that
(a) the continualion of proceedings r.vould amount to an abuse ofthejudicial
process:
(b) the person tiling the petition has lailed to provide necessary funds for
mcdiatitx aftcl gettins due opportunity in this regard; and
(c) the medialor has nol been able to fully perform one or more of the
t'unctions specilied in scction l0 rvithin a period of twelve months form
his appointrnent.
(2) Unless the ('ourt tor anr rcason orders otherwise, the dismissal of a case
does not alfect the validitr oi'anr.action taken during the pendency ofa case.
18. Conversion of a case. ( I ) A case under this Act may, on an application
made to lhe Cou[. be corrr crtcd into rrinding up proceedings for the following
reasons:-
(a) failure to achievc the acceplance of plan of rehabilitation in twelve
nronths l'ront appointment ol- an administrator excepl where the
administrator has been removed undcr section 22; or
(b) the Court linds that a petition under this Act was filed by the debtor for
tiaudulent purposes.
(2) The order ol corl,ersion under this seotion shall also provide for the
appointment of a liquidator and the Court shall lor such purpose exercise necessary
j urisdiction under thc Ordinance.
(3) An adrninistrator appointed in a case under this Act shall not be appointed as
Iiquidator in that case.
(4) An application lbr conversion under this section shall not be filed by any
party. except
(a) the debtor:
(b) the qualifying creditors: or
(c) the adnrinistrator appointed in the case.
19. Consequcnccs of conversion.{l) Nolwithstanding any provision of the
Ordinance. an order ofconversion under section l8 shall be deemed to be a winding up
order by the courr under the (Jrdinance and the r.vinding up ofthe debtor shall be deemed
to have commenced on the date ol'colnlnencement ofthe case under this Act.
(2) Except as plovided in sub-section (3), all proceedings subsequent to an order
ofconversion under scclior.r l8 shall be carried out in accordance with the provisions of
ll
thc ordinance. including the liling of appeal against such ordcr and otlrer renredics
pror ided therein.
(3) Iirllo*ing an order of conversion, a financial i.stitution mav initiate or
continue ,'vith proceedings under the Financial Institutions (Recovery of Financesy
ordinance. 2001 (xLVl ol 200r) without seeking permission lrom the irourt under the
Ordinanct.
CIIAPTER III
Administration of Debtor
20. App.intmcnt of administrator.-(l)'I'he court mav. on a petition madc b' thc qualillinl credirrrs and arie. norice and a hearing. appoint an i,soirenc1.. expert as adrninislraror ol'rhe dcbtor at an\ time belore confirmation of a plan of rehabilitation lbr
onc or nlore ot'the tbllorr.ing reasons namely:
(a) the alllirs or business ofthe debtor have been conducted or managed in a
manner likely to be prejudicial to the interest ofthe debtor o, qrulifying
crcditors:
1b.1 an1'director ol'the debtor or person concerned rvith the management of the dcbtor has been guilty of breach of trusl, misleasance or olher
misconduct touards the debtor or qualifiing creditors;
(c) the affairs or business of the debtor have been conducted or managed
rvith intent to delraud its shareholders or qualifying creditors or foi a
lraudulent or unlawful purpose or in a manner oppressive of
shareho lders or qualifying creditors;
(d) the affairs of the debtor have been so conducted or managed as to
deprive rhe qualifying creditors of their claims against the debior in full
or in part:
(e) an1, pro.iect ou,ned by the debtor is not in operation for over a period of
t\\,o vears or has been in operation intermittently or partially during the
precedirrg two years;
(l) the accumulated losses of the debtor exceed sixty percent of its paid up
capital: or
(g) an1, project set up by, or belonging to, the debtor has not commenced
operations or has not been operating smoothly or its production or
perlbrmance has so deteriorated that(i)
the rnarkct value olits shares as quoted on the stock exchange or the net
rvorth olits shares has fallen by more than seventy_five pei cent of its
par value:
(ii) debt equitl' ratio has deteriorated beyond 9: I; or
tl
(iii) cunent ratio has dctcrioratcd belond 5:l:
Provided that tho part) tiling the pctition under this scction shall additionally
demonstrate to the Court on balance of probabilities thar the mediation has not been
successlul or is not likely to be successful in thc circurnstances of the case.
(2) If an administlatol dics or resigns duriug the pendencl,ofa case under this
Aet or is removed by the Court on.just cause shorr.n. tlren a substitute adrninistrator slatl
be appointed imrnediatell,.
(3) Notice ofthe appointnrent tll'adnlinistrator in every case under this Act shall
be givcn by the appointed administrator to all inlercsted parties \\,ithin three rvorking days
of his appointment and shall additionalll be publishcd in one llnglish language and one
Urdu language daily nervspaper ol'rvide circulation in the country and the notice shall
provide lor filing ofany claims against. and interests in. the dcbtor rvith the administrator
rvithin a period ol fourteen day,s ol'publication ofthe notice.
(4) The Court may arrard such lecs and cxpcnses to an administrator as may be
prescribed by regulations.
2l . Effect of appointment of ad nr inistrato r.-( | ) On the appointment of an
administrator.-
(a) atl the por,'ers ofthe dircctors. chiefexecutive and other officers ofthe
debtor shall cease, c\cept as may be required under this Act and except
so far as the Court mav satrction the continuance thereof; and
(b) all the poners of a rcceiver appointed prior to the commencement ofa
case shall cease in relation to the property of the debtor.
(2) Where an administrator is appointed. the debtor and its directors and
management shall(a)
cUoperate rvith the adminisrraror to enable him to perfbrm his duties
under this Act;
(b) surrender to tl.re administrator all propeny of the debtor and any
recorded inforrration including books, documents, records and papers
relating to the dcbtor; and
(c) appear at an1. hearines ar \\hich its presence is required by either the
administrator or an administration comnrittee.
22. Removal and termination of administrator. {l) The Court may, at any
time belore confirmation ola plan of rehabilitation, on request ofan interested party and
after notice and a hearing, terminate the adrninistrator's appointment and reitori the
debtor to possession of its property and management of its business.
(2) The Court, after notice and a hearing. ma), remove an administrator for
malfeasance, maladministration or gross negligence arrd appoint another administrator.
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(3) \\/henever the Cour( renlo\es an administrator under sub-seclion (2). such
administrabr shall also therebl stand automatically removed in all other cascs under this
Act in u'hich such adrninistrator is then scrving unless the couft makes order otheru,ise.
(4) A vacancr in olllce oi the administrator during a case does not abate any
pending action or proceedin,u and the successor administrator shall be substituted as a
party in such action or proceeding.
23. Porvers and dutics of an atlministrator.-( I ) An adnrinistrator. shall(a)
operatc lhe dchkrr's h siness:
(b) preparc and subrlit in the Cour-t the statemenl of affairs. rvhere the
debtor has ltot donc stl:
(c) e\cept lo the extent that the Court ntakes order otherrvise, investigate the
ncts. co,tduct. asscts. liabilities and financial condition of thc debtor. the
operation ol'thc debror's business and the desirabilitv of the continuance
of such busirress and anr other matter relevanl to rehabilitation of the
dehtor:
(r.1) ar sottn ur practicable.-
(i) lile a statement ot'any investigation conducted under clause (c)
including any fact ascertained pe(aining to fraud, dishonesty.
itrcolnpetcnce- misconduct. mismanagement or irregularity in the
managemcnt of the affairs of the debtor; and
1ii) trarrsmit a cop), or a summary of any such statement to the
admirristration committees, mortgagee, receiver or charge holder
and to such other entity as the Court designates;
(e) adopt the plan of reliabilitation filed under this Act or seek modification
of rhe plan or recommencl the rvinding up ofthe debtor;
(l) institute or del'end any suit, action, prosecution or other legal
procecding, civil or crinrinal, in the name and on behalfofthe debtor, to
the cxtent necessarv:
(g) subject to approval of' the administration committees, make any
corrpromise ol arrangcment rvith creditors or persons claiming to be
creditors or having or alleging themselves to have any claim against the
debror:
(h) be accountable lol all property ofthe debtor:
(i) examine prools olclaim and object to the allowance ofany claim that is
improper;
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(j) urrless the Court makes order otheruise- lirrnish such information
conccrning thc property and busincss of thc dcbtor as is requested bv an
interestcd party; and
(k) make and submit monthly reports. a final report and final accounts ofthe
administrarion in the Court.
(2) For due discharge of the tunctions under sub-section (l). tlre admini5trator
shall have thc powcr(a)
to do anvthing that is irrcidental to errrcisirrr.. a po\\er sel out in this
section;
(b) to do anything that is necessan or convenient lor the purpose of
administering the affairs ol the dcbror: and
(c) not to be liable for any loss or dantagcs caused br, an' acl or omission
undertaken in good faith.
24. Administrator's account,--{ i) Everr aclnrinistrator shall. during his tenure
in office. present to lhe Court a comprehensive account of lris receipts and pa],ments and
dealings as administrator together with such further inhrnration as nial,be ,.l"uunt.
(2) The administraror shall cause his acc.unt and all receipts and payrnents to be
audited and send the audit report to the comrnission. State Bank and the administration
committees and to every shareholder, rvhere a committee of shareholders has not been
constituted, and submit one copy in the Court.
25. Employment of professional persons.{ I ) The administrator may employ
one or more advocates, accountants, appraisers, auctioneers or other professiorul p"rron,
to represent or assist the administrator in carrying out the adminisiralor's duties under this Act on reasonable terms and conditions of crnprol,rnent ,r,ith pri.r approval of the
adrninistralion committee ol creditors.
(2) In cases of emergency, the administrator may appoinr a person and submit
the details of terms and conditions ofsuch appointnrent along ,,vith due reasons thereofto
the administration committee of creditors.
26. Administration committces. ( l) -t'he administraror shalr appoint a
committee ol creditors and may appoint an additional comrnitlee oI shareholders, if the administrator deems appropriate in a case.
(2) 'fhe administration committees shall have adequate representation ofdifferent
classes ol creditors and shareholders of the debtor, as the case rnay be.
(3) on request or ar interested party. the Court may make order directing the administrator to appoint such additional members of an administration committee a! the court finds necessary ro ensure adequate representation of cretritors and shareholders, as
the case may be.
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27. Porve rs and tluties of administration committees.-{ I ) An administration
committee shall perlornt thc finctions givcn to it undcr this Act and in this regard may(a)
consult tlre adnrinistrator concerning thc adrrinistration of the case;
(b) revierv the acts. conduct, assets. liabilities and financial condition ofthe
debtor. the operarion of the debtor's business and the desirability of the
coutirruancc o{'suuh business and anv other matter relevant to the plan oi
relrabilitat ion: and
(c) participate in the finalization of rhe plan and file with the Court
acceplance or rc'lection of the plan. ifnecessarv.
(2) As soon as practicablc altcr thc appointmcnl of an administration committec
under this Act- the administrator shall meet ri,ith such committce to transact such business
as may be necessarv and proper.
(i) lhe porvers ol' an adrninistration contmittee shall terminate upon the
confirnration ofa plan of rehabilitation or upon tlle conversion ola case into winding up
proceedings.
28. Use, sale or leasc of proper{.-( l ) l he administrator may enter into
transactions concerning the busincss and propertv oi the debtor. including the use, sale or
lease ofthe propert)'- in the ordinarl course ofbusiness.
(2) The administrator mav use. sell or lease property ol the debtor in a manner
other than in thc ordinarl' course of business onl1, after consultation with the
administration comm ittees
29. Obtaining credit.-( l) -l-he administrator may, to the extent allowed by the
administration committees. obtain unsecurcd credit and incur unsecured debt in the
course ofdebtor's business rvhich shall be allovvable as an administrative expense.
(2) Where the admitristraror is unatrlc to obtain unsecured credit for the debtor.
the administration committecs nnv allorv the adrninistrator. on such terms and conditions
as deemed appropriate bt,the conrnrittccs. to obtain credit secured by a superior or equal
securitv interest on lhe properl\ ol'the debtor that is subject to an existing securitl,
interest:
Provided that the sanre has been approved b1. the lrolder of the existing security
interest on the propertl, of the debtor on utich such superior or equal security interest is
proposed to be granted.
30. Assumption and rejection of executorJ. contracts and unexpired
leases.{ I ) The administrator ma1,. u,ith prior approval of the Court, assume or reject
any executory contract or unexpired leasc of the debtor including(a)
any executor)' contract relating to the employment or services of any
person: and
(b) any unexpired lease olimmovable property.
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(2) 'l he administrator tnaY not reject any e\ecutor\ conlracI or uncxpired lease
\\ithout giving notice o1'his intent to reject to all parties to such e\ccUtor-\, coutract or
unexpired lease.
(3) Any part1,' rvhich is prejudiced by the debtor's rc-icction ol'an executory
contract or unexpired lease may file a claim for damages arrd such clairn shall be deerncd
to be a breach of such contract or leaseoccurring imrnediateh. prior to thc dare of filing
of the pelitiorr.
ll. claims and intcrests.-( l ) within fourteen dars or'tl.re pubrication olthe
notice olappointment of administrator, proofofanv claims or interests shall be filed s,ith
the adrninistrator by the creditors. shareholders or interested parti!.s. as the case rnal,be.
(2) An1. person who does not limely file a clai,r or iltrcrcst rr ill be cleenied to
have no clainr or intcrest against the debtor unless tlle dela) in filin.c rhc clairn or ilterest
is condoned, alter notice and a hearing. bl the Courr tbr-just cause shorrn.
(3) Anl party aggrieved by a determi.ation of trre adnrinistrator of an' claims
and interests may prefbr an appeal to the Court rvhich shall tlctcrrrrinc thc arnounr ofsuch
claims or interestsj2.
Allorvance of craims for administrative crpenses.--(r) r\ricr noticc and a
lrearing there shall be allou,ed administrative expenses. lrom time to tinrc. including
(a) the actual. necessary costs and expenscs of prcscrvine the business and
property of the debtor, including_
(i) any credit facility obtained by the debror:
(ii) wages, salaries or commissions fbr ser'ices rendercd aftcr the
appointment of administrator:
(iii) paymcnt for raw materials supplied ro the dcbror tbr its business:
and
(iv) payment for goods supplied to lrre dcbtor in the ordinarv course of
its business; and
(b) the fees and expenses awarded to the adrninistrator under section 20.
(2) Administrative expenses a[orved under this section shall ha'e priority over all other expenses and clairns.
33. Handover of propcrty of debtor to atlministrator. {l) Any person in possession, custody or control of a property that the administrator ma). use. sell or lease u.der lhis Act shall deliver such property to the adrninistrator or account fbr the'alue of such property.
(2) Any person vvho owes a debt to the debtor, rvhich is due for payment, payable on demand or pay'able on order, shall pay such debt to or on the order of the
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administrato[, except to the extent that such deht rnal bc approved b), lhe administrator to
bc oflset against a claim of such person a.eainst the debtor.
(3) After notice and a hearing. thc Court rla) excuse compliance r.vith any
provision of this section, if the interests ol'creditors sould be better served by not
handing over possession, custod), or control ol such propen) to the administrator.
3'1. Avoi*ance rrf tr*nsfers.---{ I t Erccpt as provided under sub-section (2). an
adnrinistrator may, with the appnrval ol the ('ourt. avoid a transler of an intcrest of the
debtor in property in favour of a creditor rr here suclr transfer -
(a) is made on accounl of an alrtecedent debt oucd bv the debtor before such
transfer;
(b) is made(i)
within six months belirre the date ol' the appointment of the
administrator: or
(ii) if the creditor is an insider. *ithin one 1,ear belore the date of the
appointment of the administtator: and
(c) enables such creditor to receive rnore than rvhat such creditor would have
received otherr.vise.
(2) The administrator shalI not avoid a transf-er r.vhere such transfer is(a)
intended by the debtor and the creditor to be a contemporaneous
exchange lor nerv value given to the debtor and is a substantially
contemporaneous exchange:
(b) made in payment of a debt incurred by the debtor in the ordinary course
of business and ar-cordirrg to ordinarv husiness terms; or
(c) for the benefit ola creditor to the extent that such creditor gives new
value to or for the benefit ofthe debtor subsequent to the transfer.
(3) To the extent that a transfer is avoided under this seclion, the Court may
allow the administrator to recover the property transferred rlr lhe value of such property
f'rom the initial transferee or subsequent transferee.
(4) For the purposes of this section tlre expression, ''new value" means money
worth in goods, services or ne'uv credit or released bv a translcree of property previously
transferred to such transferee in a transaction that is neither void nor voidable by the
administrator under law, including proceeds of such property, but does not include an
obligation substituted for an existing obligation.
35. Abandonment of property of debtor.-{ l) Atler notice and a hearing, the
adrninistrator may abandon any property of the debtor that is burdensome or that is of
inconsequential value and benefit to the debtor.
l8
(1) On request of an interested party and afler notice and a hearinq. thc Court
tnar order the administrator to abandon any property ofthe debtor that is burtlensotne ur
that is of inconsequential value and benefit to the debtor.
CHAPTER IV
Miscellaneous
16. Act not in derogation. r'liis Act sha be in addirion to and nor i,
dcrotation ofanv other las applicablc to debtors.
17. Por'er to make rules.-The Minister-in-charge of the l-'edcrar (]or.ernment
ntar. br notification in the official Gazettc. make such rules as rnar he necessarr to carrr
oul tlte pul'poscs ol'this Act.
i8. Porver to mako regutations.-The Commission nra\,- br n.tification i. the .llicial Gazettc. rnake regulations in respect ofthe matters expresslr required in this Act
lo be O,.t"r'n"U br lhe Conrnission.
i9. Porver to issue directives, circulars, guiderines, etc.-r'hc ('.rnr,issi.n
rurar'. lrom time to tims. issue such directives, circurars and guiderines as rnar. bc .ccessar\ fbr carrfing out the purposes or this Act, the rurei t,r rcgurations rnadc
lhere rrrrder.
40. Porver to removc difficurties.-ff any difficulty arises i, giving effect to thc pro'isi.ns of this Act, the M inister-in-charge of the Federar Goi.ernrient mar.. br notification in the olficial Gazete, make such order not inconsiste.t "itn trre p.o.,Lions
of this Act and as may be necessary to remove the difficulty.
I9
The existi.g institutional arrangements and Icgar process for rer i'ar and
rehabilitation of distressed companiesare both inadequare and time consuming. ufforts in the past have been made largel-v on crediior rriendir re('o\cr\ 6r,,,rhich",esulieJ in imbalance of legal remedies lor rehabilitati.rr of Jcbrors. Therelirrc. a cornprehensive
legal framework is nor' urgentry needed Io rehabiritate the distressecr c.mpanies and
businesscs in the country.
The Corporate tlehabilitation Bill, 2016 prorides ntcchanisnt lbr rehabilitation ol.
the distressed companies rvhich is need of the hotrr tbr sustainabrc ,r.orrth of corpo.ate
sector. 'lhe Bill rvill put the economy on fast track and r'ill result iri retluction of:Non_ pcrforming Ioans.
'fhe Bill providcs an equal opportunit-\ to the cornpanics and its creditors to come
up for the rehabilitarion proceedings of the conrpanics hciirrc thc I Iigh courr(s). .l.hc Bill requircs submission of rehabilitation plan before rhe lligh ('ourr. tne bitt further
provides that rehabilitation plan will be mutually agrccd upon bl the shareholders ofthe
companies and their creditors. In this regard the High Cnr.t ihnll appoint insolvency
experts who will undertake mediation between the cornpanies ancl iheir credirors for detenrination of liabilities towards the creditors.
The specialized features and unique requirenrents ofcorporate Rehabilitation Bill
necessitate the promulgation ofan independent arrd comprehensivc piece or'regislation.
MINISl'ER.IN.CHARGE
SENATOR MOIIAMMAD ISHAQ DAR

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