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Chaitra 27, 1939, at 03:13:54 AM
The Corporate Restructuring Companies Act, 2016
Act No. XXXII of 2016
[29th June, 2016]
An Act to provide for the establishment and regulation
of corporate restructuring companies
WHEREAS it is expedient to provide for the establishment,
licensing and regulation of corporate restructuring companies and the manner in
which they can carry on business;
It is hereby enacted as follows:---
1. Short title, extent and commencement.—(1) This Act
shall be called the Corporate Restructuring Companies Act, 2016.
(2) It extends to the whole of
(3) This section shall come into force at once and the
remaining provisions of this Act shall come into force on such date as the
Federal Government may, by notification in the official Gazette, appoint and
different dates may be so appointed for different provisions of this Act.
2. Definitions.—(1) In this Act, unless there is
anything repugnant in the subject or context,---
(i) ”affiliate” means a shareholder, director,
employee, agent or adviser of a financial institution and includes an entity
that directly or indirectly controls or is controlled by such financial
institution, and a shareholder, director, employee, agent or adviser of such
entity;
(ii) ”collateral” means a property in relation to
which security interest of any description has been created;
(iii) ”control” means direct or indirect
ownership of fifty percent or more of the voting rights in an entity;
(iv) ”corporate restructuring company” means a
public limited company licensed by the Commission under this Act to carry out
the business of,---
(a) acquisition, management, restructuring and
resolution of non-performing assets of financial institutions; and
(b) restructuring, reorganization, revival and
liquidation of commercially or financially distressed companies and their
businesses.
(v) ”Commission” means the Securities and
Exchange Commission of
(vi) ”Court” means the High Court having
territorial jurisdiction;
(vii) ”financial asset” includes any short,
medium or long term interest and non-interest bearing loan, finance,
advance, lease, installment, term finance certificate, participation term
certificate, modaraba, musharaka, ijara, profit and loss sharing agreement,
redeemable capital, guarantee or contractual right to receive payment of money
in respect of sums advanced or committed to an obligor by a financial
institution;
(viii) ”financial institution” means a financial
institution as defined under clause (a) of section 2 of the Financial
Institutions (Recovery of Finances) Ordinance, 2001 (XLVI of 2001);
(ix) ”Government Agency” means a department,
agency or a body corporate set up or established by the Federal Government or a
Provincial Government and includes the Federal Government and a Provincial
Government itself;
(x) ”non-performing asset” means a financial
asset held on the books of a financial institution with respect to which the
obligor has been in arrears for more than one year on any payment obligation
and includes all security interests with respect thereto;
(xi) ”obligor” means any individual,
proprietorship, partnership, trust, company or other entity that has, with
respect to a financial asset, a contractual or legal obligation to make
payment, effect performance, provide security or collateral, whether as
principal, surety, guarantor or otherwise and whether such obligation is
primary, secondary, matured or contingent;
(xii) ”Ordinance” means the Companies Ordinance,
1984 (XLVII of 1984);
(xiii) ”person” includes an individual,
partnership, firm and company but does not include a Government agency;
(xiv) ”prescribed” means prescribed by rules or
regulations made under this Act;
(xv) ”property” means property of any
description, movable or immovable, tangible or intangible, and rights,
interests, title and claims attached to property, whether certain or
contingent, existing or arising in future, and shall include documents of title
pertaining to a property;
(xvi) ”regulations” means regulations made by the
Commission under this Act;
(xvii) ”rules” means rules made by the Federal
Government under this Act;
(xviii) ”security interest” means a guarantee,
charge, mortgage, lien, hypothecation, pledge, assignment or any other security
interest in relation to collateral;
(xix) ”SECP Act” means the Securities and
Exchange Commission of Pakistan Act, 1997 (XLII of 1997);
(xx) ”speculative transaction” means a
transaction which,---
(a) substantially relates to the purchase or sale
of any commodity, including bonds, debentures, shares or right to, or interest
in, property of any description;
(b) provides for settlement or execution
otherwise than by actual delivery or transfer of such commodity;
(c) secures against loss on account of price
fluctuations and risks associated with volatility in market; and
(d) may be prescribed by the Commission from time
to time;
(xxi) ”transferor” means the financial
institution which enters into the transfer and assignment agreement provided in
clause (a) of sub-section (1) of section 6; and
(xxii) ”vesting date” means the date of signing
of the transfer and assignment agreement between a financial institution and a
Corporate Restructuring Company as provided in clause (b) of sub-section (I) of
section 6.
(2) The words and expressions used but not defined in
this Act shall have the same meaning as is assigned to them in the Ordinance or
the SECP Act.
3. Act to override other laws, contracts, instruments,
memorandum and articles.—Save as otherwise expressly provided in this Act,
the provisions of this Act shall have effect notwithstanding anything to the
contrary contained in any other law, contract, instrument, memorandum or
articles of a company or in any agreement executed by a company or in any
resolution passed by the company in a general meeting or by its directors,
whether the same is registered, executed or passed, before or after the
commencement of this Act.
4. Incorporation of Corporate Restructuring
Company.—(1) No Corporate Restructuring Company shall be incorporated without
the prior approval of the Commission.
(2) No Corporate Restructuring Company shall carry on
business unless it is established as a public limited company under the
Ordinance and holds a licence issued in this behalf by the Commission and any
such licence may be issued subject to such general or special conditions
and upon payment of such fee as the Commission may deem fit to impose.
5. Functions and powers.—(1) Subject to the provisions
of section 4, a Corporate Restructuring Company may exercise one or more of the
following functions and powers, namely:---
(a) to acquire, buy, hold, manage, restructure,
reschedule, resolve, settle, recover, assign, transfer and dispose of
non-performing assets;
(b) to deal with any loan, advance, financial
commitment, lease, hire-purchase, rental, sale and buy-back arrangement,
mudaraha, musharaka, ijara or other financial transaction or security interest
relating to non-performing assets;
(c) to acquire, take over, hold, re-organize,
restructure, encumber, assign, sell, lease and otherwise deal with any asset,
property, undertaking or collateral with respect to non-performing assets;
(d) to acquire, hold, manage, restructure,
reorganize, revive, merge, amalgamate, lease, liquidate, assign and dispose of
distressed companies, their businesses and properties;
(e) to advise, develop, advance, support,
implement and raise finances for rehabilitation, restructuring, reorganization
or liquidation of distressed companies, their businesses and properties;
(f) to enter into partnerships, joint venture
agreement, profit or loss sharing arrangement or otherwise collaborate or
participate with any company or other person in relation to non-performing
assets or distressed companies;
(g) to commence, continue, defend, desist,
enforce, implement and perform any and all actions or activities in relation to
non-performing assets and distressed companies; and
(h) to establish, promote, concur or participate
in establishing or promoting any company or other entity, the establishment or
promotion of which may seem, directly or indirectly, to benefit its business.
(2) No Corporate Restructuring Company or its
directors, officers and agents shall perform any function and exercise any
power under this Act so as,---
(a) to involve in speculative transactions;
(b) to aid an obligor with the sole object to
avoid its debt obligations or performance of a contract, remove its assets and
properties from the reach of its creditors, evade payment of any tax, duty or
other fiscal charge to Government Agency;
(c) to circumvent fair valuation and proper
appraisal of non-performing assets and the collateral thereof by reputable
evaluating and appraising entities;
(d) to transact business other than at arm’s
length; and
(e) not to comply with the applicable laws,
except as expressly provided otherwise under this Act.
6. Transfer of non-performing assets.—(1)
Notwithstanding anything to the contrary contained in any law, decree,
judgment, order, contract, instrument or document,---
(a) a financial institution may, with the prior
approval of its Board of Directors, transfer and assign its non-performing
assets to a Corporate Restructuring Company, other than a Corporate
Restructuring Company established, owned or controlled by such financial
institution or its affiliates, by entering into a transfer and assignment agreement
with it on such terms and conditions as may be mutually agreed upon between
them;
(b) on the vesting date, all rights, title,
interest, benefits, privileges and remedies of such financial institution,
concerning the non-performing assets and the obligors thereto, shall stand
transferred, assigned, conveyed, sold and vested in favour of the Corporate
Restructuring Company without the need of any further action, agreement or
instrument;
(c) the transfer and assignment agreement shall
not be required to be compulsorily registered under any law; and
(d) all contracts, deeds, instruments, approvals,
commitments or consents relating to the non-performing assets subsisting or
having effect immediately before the vesting date and to which the transferor
may have been a party or beneficiary shall be of full force and effect in
favour of or against the Corporate Restructuring Company and may be enforced or
acted upon as fully and effectively as if, in the place of such financial
institution, the Corporate Restructuring Company had been a party or
beneficiary.
(2) The rights, powers and remedies provided to a
Corporate Restructuring Company under this Act may be exercised separately or
concurrently by it and are in addition to and not in lieu or derogation of any
other rights or remedies that it or any other person may legally have in
respect of non-performing assets and the collateral thereof.
7. Legal proceedings.—(1) All proceedings by or
against a transferor relating to the non-performing assets transferred to a Corporate
Restructuring Company and the obligors and collateral thereof, which may be
pending before any Court, tribunal, arbitrator or authority immediately before
the vesting date, shall,---
(a) be continued, prosecuted, defended, enforced
and executed by or against the Corporate Restructuring Company in the same
manner and to the same extent as would have been continued, prosecuted,
defended, enforced and executed by or against the transferor;
(b) proceed from the stage which such proceedings
had reached on the vesting date and shall not require any fresh filing,
recalling and rehearing of any witness or recording of any evidence already
completed; and
(c) be continued, decided and disposed of in
accordance with the provisions of the respective law, as amended or re-enacted,
under which the same were instituted or filed.
(2) Any new proceedings by or against the
Corporate Restructuring Company may be instituted and shall be entertained,
adjudicated and disposed of in accordance with the laws, as amended or
re-enacted, under which proceedings were authorized to be instituted by or
against the transferor, respectively, including the Financial Institutions
(Recovery of Finances) Ordinance, 2001 (XLVI of 2001), the Ordinance, the
Offences in Respect of Banks (Special Courts) Ordinance, 1984 (IX of 1984),
Code of Civil Procedure, 1908 (Act V of 1908) and the Code of Criminal
Procedure, 1898 (Act V of 1898).
(3) Without prejudice to the provisions of
sub-section (2), a Corporate Restructuring Company shall be deemed to be a
financial institution for the purposes of clause (a) of section 2 of the
Financial Institutions (Recovery of Finances) Ordinance, 2001 (XLVI of 2001)
but shall not be treated as a banking company under the Banking Companies
Ordinance, 1962 (LVII of 1962).
(4) Any reference to the transferor in the
proceedings referred to in this section, the record and documents of such
proceedings or decrees, judgments and orders passed in such proceedings shall,
except where the context otherwise requires, be construed and read as reference
to the Corporate Restructuring Company.
(5) Without prejudice to the provisions of the
foregoing sub-sections, the Corporate Restructuring Company may submit an
application supported by the affidavit of its chief executive officer,
containing particulars of the proceedings mentioned under sub-section (1), with
the Registrar of the court, tribunal, arbitrator or authority before which such
proceedings are pending and on receipt of such affidavit the name of the
Corporate Restructuring Company in place of the transferor, as the case may be,
shall be substituted.
8. Notice and discharge.—(1) A Corporate Restructuring
Company may, on or after the vesting date, give a duly signed and sealed notice
of transfer of the non-performing assets to the obligors, State Bank of
Pakistan, Commission and any other concerned person, including, to the
registering authority in whose jurisdiction any security interest with respect
to such non-performing assets or any other interest concerning the collateral
or any indebtedness of the obligors relating to the non-performing assets, had
been recorded or registered.
(2) A transfer and assignment agreement shall not
be effective as against the obligors of the non-performing assets transferred
by such agreement until due notice thereof is provided to such obligors.
(3) Subject to sub-section (2), the obligors of
the non-performing assets transferred and assigned to a Corporate Restructuring
Company by a financial institution shall make payment to the Corporate
Restructuring Company and obtain any effective discharge from it after
retirement of their liabilities to the entire satisfaction of the Corporate
Restructuring Company.
9. Power to require information.—(1) The
Commission may, at any time, by notice in writing, require one or more
Corporate Restructuring Companies and their management to furnish it, within
the time specified therein or such further time as the Commission may allow,
any statement, information or document relating to the business or affairs of
such Corporate Restructuring Companies.
(2) No Corporate Restructuring Company or its
director, officer, employee, auditor or agent shall, in any document,
prospectus, report, return, accounts, information or explanation required to be
furnished in pursuance of this Act or the rules or regulations made thereunder,
make any statement or give any information which he knows or has reasonable
cause to believe to be false or incorrect or omit any material fact therefrom.
10. Special audit.(1)
The Commission shall monitor the general financial condition of the Corporate
Restructuring Companies and may, at its discretion, order special audit and
appoint an auditor to carry out detailed scrutiny of the affairs of one or more
Corporate Restructuring Companies and the Commission may, at any time, issue
such directions as it may deem appropriate.
(2) The Commission may, during the course of
special audit, pass such interim orders and directions as it may deem
appropriate.
(3) On the basis of the special audit report, the
Commission may direct a Corporate Restructuring Company and its management to
do or to abstain from doing such acts that may secure the interest of its
shareholders and creditors and any such directions shall be complied within
such time as may be specified by the Commission.
(4) The provisions of section 255 of the Ordinance
shall apply mutatis mutandis to the auditor appointed to carry out
the special audit of the Corporate Restructuring Company.
11. Inquiry by the Commission.—(1) On the complaint of
any concerned person or on its own motion, the Commission may, on the basis of
material available with it, cause an inquiry or inspection to be made by any
person appointed in this behalf into the affairs of a Corporate Restructuring
Company or its directors, officers or an associated company or undertaking.
(2) Where an inquiry or inspection under
sub-section (1) has been ordered, the director, officer or associated company
or undertaking to which the enquiry or inspection relates and every other
person who has had any dealing with the Corporate Restructuring Company, its
director, officer or associated company shall furnish such information in his
custody or power or within his knowledge relating to or having bearing on the
subject-matter of the inquiry or inspection as the person conducting the
enquiry or inspection may by notice in writing require.
(3) The person conducting an inquiry or
inspection under sub-section (1) may call for, inspect and seize books of
account and documents in possession of the Corporate Restructuring Company or
its directors, officers or associated companies.
(4) Upon completion of the inquiry or inspection,
a formal report will be submitted to the Commission about the outcome of the
inquiry or inspection and the Commission may, after sharing the inquiry or
inspection report, and where deemed appropriate, after providing an opportunity
of hearing to the Corporate Restructuring Company, pass such directions or
orders, including imposition of fine, as it deems fit.
12. Destruction of documents. No person shall
destroy, falsify, conceal or dispose of, or cause or permit the destruction,
falsification, concealment or disposal of, any document, which he knows or
ought to know is relevant to an inquiry, inspection, auditor has been called by
the Commission.
13. Penalty for non-compliance or contravention.—(1)
Notwithstanding anything contained in any other provision of this Act, if a
Corporate Restructuring Company or its affiliate or associated company fails or
refuses to comply with or knowingly contravenes any provision contained in this
Act or of any of the provisions of the rules or regulations made thereunder or
any order or direction or directives or circular passed by the Commission under
the provisions contained in this Act or knowingly and willfully authorizes or
permits such failure, refusal or contravention or makes a false statement,
shall, in addition to any other penalty provided by law, be liable to a fine of
an amount not exceeding fifty million rupees and for a further fine of two
hundred thousand rupees for every day, after the first day, during which the
contravention continues.
(2) Without prejudice to the provisions of
sub-section (1), in case of contravention of any provision of this Act or the
rules or regulations made thereunder or non-compliance of any direction given
or order passed thereunder by the Commission, the Commission may cancel the
licence of a Corporate Restructuring Company, after issuing a show cause notice
and giving it an opportunity of being heard, or pass any other order which may
be deemed appropriate by the Commission.
(3) Upon cancellation of the licence, the
functions and carrying on the business of a Corporate Restructuring Company
shall cease and the Commission may move the Court having jurisdiction for
winding up of the Corporate Restructuring Company.
14. Enforcement of orders of the Commission.—(1) Any
fine imposed by the Commission in the exercise of its powers under this Act
shall be payable to the Commission and may be recovered by the Commission as
arrears of land revenue.
(2) Any amount which cannot be recovered as
arrears of land revenue may be recovered as a decree for the payment of money
under the Code of Civil Procedure, 1908 (Act V of 1908).
(3) The Commission may issue such directions as
may be necessary or expedient to give effect to its orders or to prevent abuse
of its process, including but not limited to, seeking the assistance of the
local administration or Police who shall be bound to provide assistance.
15. Power to make rules.—(1) The Federal Government
may, by notification in the official Gazette, make rules for carrying out the
purposes of this Act.
(2) All rules made under sub-section (1) shall be
subject to previous publication for eliciting public opinion thereon.
16. Power to make regulations.—(1) The
Commission may, by notification in the official Gazette make regulations, not
inconsistent with the rules, for carrying out the purposes of this Act.
(2) All regulations made under sub-section (1) shall
be subject to previous publication for eliciting public opinion thereon.
17. Power to issue directives, circulars,
guidelines, etc. The Commission may from time to time issue such
directives, circulars, guidelines, etc. as may be necessary for carrying out
the purposes of this Act or the rules and regulations made thereunder.
18. Power to remove difficulties. If any
difficulty arises in giving effect to the provisions of this Act, the President
may, by notification in the official Gazette, make an order not inconsistent
with the provisions of this Act for removing the difficulty.
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