THE COMPANIES ORDINANCE, 1972

Compromises and Arrangements

196.—(1) Where a compromise or arrangement is proposed between a company and its shareholders, debenture holders or creditors, or any class of them, the court may on the application of the company or of any person affected by the compromise or arrangement, or, in the case of a company being wound up, of the liquidator, order a meeting of the shareholders, debenture holders or creditors, or of the class or classes of shareholders, debenture holders or creditors affected by the compromise or arrangement, to be called and held in such manner as the court directs.

(2) If two or more classes of shareholders, debenture holders or creditors are affected by she compromise or arrangement, the court shall direct a separate meetings to be held for each such class, and for the purpose of this section creditors shall be deemed to belong to different classes if there is any difference between them as to : —

(a)   any security or guarantee for the payment of their claims ; or

(b)   the order in which their respective claims would rank for payment if an order for the winding up of the company were made on the date when the meeting is to be held; or

(c)   the date when their claims fall due for payment, that is to say, whether their claims are immediately owing and are payable not later than one year after the date of the meeting, or are contingent or not immediately owing or are payable more than one year after that date.

(3)  If the shareholders, debenture holders or creditors, or the members of the class or each of the classes of such persons, at the meetings directed by the court resolve, by the votes of the holders of three quarters in value of the interest represented at each such meeting in respect of which votes are cast by the holders of such interests or their proxies, to agree to the compromise or arrangement, the compromise or arrangement shall, if approved by the court and subject to subsection (9), be binding on all the shareholders, debenture holders or creditors, or on all the members of the class or classes of such persons, who are affected by the compromise or arrangement, and also on the company and, in the case of a company in the course of being wound up, on the liquidator and contributories of the company.

(4)  The court shall not approve a compromise or arrangement unless it is satisfied that : —

(a)   the notice calling tihe meeting or each of the meetings held under this section, or a statement accompanying it, contained an adequate explanation of the terms and effect of the compromise or arrangement and sufficiently disclosed the interests mentioned in section 197 and the effect of the compromise or arrangement on them ;

(b)   the persons who voted rn favour of the compromise or arrangement at the meeting or at each of the meetings directed by the court, acted in good faith in the interests of the shareholders, debenture holders or creditors for whom the meeting was held, or in good faith in the interests of the class of such persons to which they belong ; and

(c) the compromise or arrangement is fair and reasonable, having regard to the interests of the persons affected thereby, and, if the company is insolvent, the rights of those persons if the company were to be wound up by the court forthwith.

(5)  A copy of each notice calling a meeting directed by the court, of every statement accompanying the notices calling such meetings, of the document embodying the compromise or arrangement and of the application to the court to approve it, shall be delivered to the Registrar by the company or other person who makes the application immediately after the application has been made, and the Registrar, without being made a party to the proceedings, may make representations to the court on the hearing of the application.

(6)  Whether the Registrar makes representations on the hearing of the application to the court to approve the compromise or arrangement or not, the court may at any stage of the proceedings refer the compromise or arrangement to him for his report and opinion, and the court may take any such report and opinion into account in deciding whether to approve the compromise or arrangement, or to refuse its approval, or to give its approval subject to conditions or subject to the modification of the compromise or arrangement.

(7)  It is hereby declared that the court may approve a compromise or arrangement under this section notwithstanding that :--

(a)   it is not within the objects or powers of the company contained in its memorandum ; or

(b)    it could be effected, wholly or partially, under some other provision of this Ordinance.

(8)  On the hearing of an application to the court to approve a compromise or arrangement, the coult may give its approval subject to such conditions or modifications of the compromise or arrangement as it thinks fit and the compromise on arrangement as so approved by the court shall, subject to subsection (9), be binding on the persons mentioned in subsection (3),

(9) An order of the court approving a compromise or arrangement shall have no effect until a copy of the order has been delivered to the Registrar for registration, and if the compromise or arrangement affects shareholders or any class of shareholders of the company, a copy of every such order shall be annexed to every copy of the memorandum or articles of the company issued after the order has been made as though it were an alteration or addition made thereto under this Ordinance, and section 17 shall apply accordingly.

(10) In this section and sections 197 and 198 the expression "company" means any company liable to be wound up under this Ordinance, and without prejudice to the generality of the expression, an "arrangement" includes —

(a)   a reorganisation of the share capital of a company by the consolidation of shares of different classes, or by the division of shares into shares of different classes, with or without an alteration of the nominal or paid up values of any of the shares or the alteration of the rights attached to them ;

(b)   a reconstruction of a company or an amalgamation of a company with one or more other companies, whether already incorporated or to be incorporated under the arrangement; and

(c)   an arrangement for the acquisition of the whole of the snares or debentures, or the whole of a class of shares or debentures, of a company by another company in consideration of cash or the allotment or transfer of shares or debentures of that other company or of any other body corporate.

197.—(1) Where a meeting of shareholders, debenture holders cr creditors of a company, or of a class of shareholders, debenture holders or creditors of a company, is called uqder the last foregoing section there shall-—

(a) with every notice calling the meeting which is sent to a shareholder, debenture holder or creditor be sent also a copy of the document embodying the compromise or arrangement and a statement explaining the effect of it and disclosing any material interests affected by it of the directors and substantial shareholders of the company, of any company which belongs to the same group of companies as the company, and of any company which is an associated company of the company or of any company which belongs to the same group as aforesaid, whether such interests are held by those persons as directors or as share holders, debenture holders or creditors of any of the said companies or otherwise ;

(b) in every notice calling the meeting which is given by advertisement, be included either a copy of the document embodying the compromise or arrangement and such a statement as is mentioned in paragraph (a) of this subsection, or a notification of at: address in Seychelles at which shareholders, debenture holders or creditors entitled to attend the meeting may obtain copies of that document arid of such a statement as aforesaid.

(2)  Where the compromise or arrangement affects the rights of debenture holders of the company, the statement mentioned in subsection (1) shall also disclose the material interests affected by it of the trustees of any trust deed covering the debentures, and if any trustee is a corporation, shall also disclose such interests of the trustee's directors.

(3)  Where a notice given by advertisement includes a notification that copies of the document embodying the compromise or arrangement ivnd of a statement explaining the effect of the compromise or arrangement may be obtained by shareholders, debenture holders or creditors entitled to atieivi the meeting, every such shareholder, debenture holder or creditor shall, on making application in the manner indicated by the notice, be furnished by the company free of charge with a copy of the document and of the statement.

(4) It shall be the duty of every person who has a material interest in the compromise or arrangement which is required to be divjlused under subsection (2) or subsection (3) to notify the company of his interest and of the way in which it will be affected by the compromise or arrangement as soon as he becomes aware that the compromise or arrangement is to be submitted to a meeting or meetings of the persons affected thereby, and if he fails to do so he shall be guilty of an offence punishable by a fine not exceeding ten thousand rupees.

(5) Where a company, or any other person who has obtained an order of the court under section 196(1), fails to comply with any requirement of this section, every officer of the company who is in default or that other person (as the case may be) shall be guilty of an offence punishable by a fine not exceeding ten thousand rupees, and for the purpose of this subsection, a liquidator of the company shall be deemed to be an officer of the company :

Provided that in a prosecution under this subsection, the accused shall not be guilty of an offence if he shows that the failure to comply with this section was due to the failure of some other person to supply the 'necessary particulars as to his interests, and that no other sufficient information as to whose interests was available to the accused.

198. —(1) Where an application is made to the court under section 196 for the approval of a compromise or arrangement proposed between a company and any such persons as are mentioned in that section, and it is shown to the court that the compromise or arrangement has been proposed for the purpose of or in connection with a scheme for the .reconstruction of any company or companies, or the amalgamation of any two or more companies, or for the acquisition oi the whole of the shares or debentures, or the. whole of a class of shares or debentures, of a company by another company, e«u that under the scheme the whole or any part of the undertaking, property, shares or debentures of any company concerned in the scheme (in this section referred to as "a transferor company") is to be transferred to another company fin this section referred to as "the transferee company"), the court may, either by the order sanctioning the compromise or arrangement or by any subsequent order, make provision for all or any of the following matters : —

(a) the transfer to the transferee company of the whole or any part of the undertaking, property, shares or debentures, or the whole or part of the liabilities, of any transferor company;

(b) the allotment, transfer or appropriation by the transferee company of any shares or debentures which under the compromise or arrangement are to be allotted, transferred or appropriated by that company to or for any person ;

(c) the continuation by or against the transferee company of any legal proceedings pending by or against any transferor company ;

(d) in the case of a reconstruction or amalgamation, the dissolution, without winding up, of any transferor company ;

(e) the provision to be made for any persons, who within such time and in such manner js the court directs, dissent from the compromise or arrangement ;

(f) such incidental, consequential and supplemental matters as are necessary to secure that the reconstruction or amalgamation or acquisition of shares or debentures shall be fully and effectively carried out.

(2)  Where an order under this section provides for the transfer of property or liabilities, that property or those liabilities shall, by virtue of the order, be transferred to and become the property or liabilities of the transferee company, and in the case of any property, if the order so directs, freed from any charge which is by virtue of the compromise or arrangement to cease to have effect.

(3)  An order under this section may provide for the transfer of contracts, rights and obligations notwithstanding that, apart from the provisions of this Ordinance, such contracts, rights or obligations are not assignable or transferable by agreement, and may also direct that the transferee company shall be substituted for any transferor company in respect of any office or appointment made by any person or body of persons or by the court.

(4)  Where an order is made under this section, every company in relation to which the order is made shall cause a copy of it to be delivered to the Registrar for registration within fourteen days after the order is drawn up, and if default is made in complying with this subsection, the company and every officer of the company who is in default shall be liable to a default fine.

(5)  If an order made under this section provides for the transfer of shares or debentures of any company, the order shall operate as though it were an instrument of transfer executed by all necessary parties, and the company shall register the transfer accordingly in its register of members or debenture holders and shall issue all necessary certificates in respect of the shares or debentures to the persons entitled thereto.

(6) In this section the expression "property" includes property, rights and powers of every description, and the expression "liabilities" includes duties.