THE COMPANIES ORDINANCE, 1972

Declaration of solvency

253.—(1) Where it is proposed to wind up a company voluntarily, the directors of the company or, in the case of a company having more than two directors, the majority of the directors, may at a meeting of the directors make a declaration signed by them to the effect that they have made a full inquiry into the affairs of the company, and that, having so done, they have formed the opinion that the company will be able to pay its debts in full within such period, not exceeding twelve months from the commencement of the winding up, as may be specified in the declaration.

(2)  A declaration made as aforesaid shall have no effect for the purposes of this Ordinance unless—

(a)   it is made within five weeks immediately preceding the date of the massing of the winding up resolution and is delivered to the Registrar for registration before that date; and

(b)   it embodies a statement of the company's assets and liabilities as at the latest practicable date before the making of the declaration, not being a date earlier than three months before the date of the declaration ; and

(c)   the winding up resolution is passed as a special resolution.

(3)  Any director of a company making a declaration under this section without having reasonable grounds for the opinion that the company will be able to pay its debts in full within the period specined in the declaration, shall be liable to a fine not exceeding ten thousand rupees or to imprisonment for not more than two years, or to both such fine and imprisonment; and if the company is wound up in pursuance of a resolution passed within a period of five weeks after the making of the declaration, but its debts are not paid or provided for in full within the period stated in the declaration, it shall be presumed until the contrary is shown that the director did not have reasonable grounds for his opinion.

(4)  A winding up in respect of which a declaration has been made and delivered in accordance with this section is in this Ordinance referred to as "a member's voluntary winding up", and a winding up in the case of which a declaration has not been made and delivered as aforesaid is in this Ordinance referred to as "a creditors' voluntary winding up".