Distressed cos: Winding up proceedings continue unless formally stayed: SECP

ISLAMABAD: The Securities and Exchange Commission of Pakistan (SECP) has conveyed to the companies that the winding up proceedings against companies will continue unless formally stayed by the Court or SECP.

The SECP has issued Frequently Asked Questions (FAQs) on Mergers, Amalgamations & Winding up. The SECP has responded to a query: does filing a revival application automatically stop winding up proceedings?

The SECP responded, “No. Winding up proceedings continue unless formally stayed by the Court (Section 313) or SECP (for Commission-initiated winding up). It is critical to apply for a stay along with the revival plan to prevent parallel dissolution actions,” SECP added.

The SECP has clarified that a distressed company can file a petition before High Court under section 8 of the Corporate Rehabilitation Act, 2018 for an order of mediation, supported with plan of rehabilitation, statement of affairs and special resolution approving the plan of rehabilitation. The said law provides a framework for rehabilitating financially distressed companies with recovery potential. It allows companies to apply for a court supervised rehabilitation plan, which outlines their financial obligations and proposes methods for managing them.

Filing of winding up petition does not mean that the company has ceased to exist. The company exists as a corporate entity with all the rights of such entity, with only change that its management and administration is to be carried on through provisional manager/ liquidators, if appointed by the Court, till the final dissolution of the company, SECP added.

The term ‘winding up’ of a company may be defined as the proceedings by which a company is dissolved (i.e. the life of a company is put to an end).

Copyright Business Recorder, 2025