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PART - I
PRELIMINARY
1. Title, Commencement, Territorial Extent and Repeal
(1) This Act may be called the Companies Act of the Kingdom of Bhutan, 2000.
(2) Itshallcom e into force w ith effectfrom ... ...
(3) It extends to the whole of the Kingdom of Bhutan and applies to every body corporate with share capital incorporated by or under this Act or the Companies Act of the Kingdom of Bhutan, 1989.
(4) The Companies Act of the Kingdom of Bhutan, 1989 is repealed.
2. Definitions
(1) In this Act, unless the context otherwise requires:
(i) "A dm inistrative M inistry" means the Ministry to which a company is attached by the nature of its operations and the programme to which it pertains.
(ii) Alter and Alteration shall include the m aking of additions and omissions.
(iii) "A rticles" means the Articles of Incorporation of a company as originally formed or as altered by special resolution.
(iv) "A uthorised Share C apital shall m ean the m axim um am ount of capital specified in the Articles within which the company is authorised to issue shares.
(v) Board of Directors or Board in relation to a Company m eans directors collectively acting as the Board of directors of the Company.
(vi) Body Corporate m eans any body corporate w ith or w ithout share capital and whether or not it is a company to which this Act applies, and includes a company incorporated outside Bhutan.
(vii) Capital m eans amounts contributed by shareholders towards the share capital of a company and includes capital contributed from retained earnings or other surplus accounts.
(viii) Certificate of Incorporation m eans a C ertificate issued by the Registrar of Companies in prescribed form.
(ix) Chief Executive Officer m eans a full-time manager, by whatever name called, appointed by the Board with the approval of the company in general meeting to manage the day to day affairs of the company or as otherwise determined by the Board, or the Articles or shareholders in general meeting.
(x) Chairman m eans a director of the com pany appointed by the B oard as Chairman of the Board of Directors and general meetings of shareholders.
(xi) Company m eans a com pany lim ited by shares incorporated and registered under this Act or an existing company incorporated by or under the Companies Act of the Kingdom of Bhutan, 1989.
(xii) "D ebenture" means a debt instrument acknowledging indebtedness to a person or persons with or without interest and of specified maturity period, and constituting a charge on the assets of the company.
(xiii) Depository m eans a depository for securities operating under the authority and direction of the Royal Monetary Authority of Bhutan.
(xiv) Director m eans any person occupying the position of a director by whatever name called.
(xv) Financial Institution shall have the m eaning assigned by the F inancial Institutions Act of Bhutan, 1992.
(xvi) Foreign Company m eans a body corporate incorporated outside Bhutan.
(xvii) Government m eans the R oyalG overnment of Bhutan.
(xviii) Government Company m eans a com pany in w hich one hundred percent of the paid up share capital is held by the Government
(xix) Government Controlled Company m eans a com pany in w hich m ore than 50 per cent of the paid up share capital is held jointly or severally by the Government and/or Government controlled corporations, and includes a subsidiary of a Government Company.
(xx) Holding Company m eans a com pany deem ed to be a holding com pany of another by virtue of the latter being its subsidiary company.
(xxi) Issued share capital m eans the value of shares w hich the com pany has issued in accordance with this Act.
(xxii) Listed Company m eans a com pany w hose shares or other securities are listed on the Royal Securities Exchange of Bhutan Limited.
(xxiii) Ministry m eans the M inistry of T rade and Industry,R oyal G overnm ent of Bhutan
(xxiv) "P aid up share capital m eans the capital as paid up and allotted to the shareholders of a company.
(xxv) Person includes an individual, a com pany, un-incorporated association, Government agency, a natural person in his or her capacity as a legal representative and any body of persons recognized as a separate legal entity.
(xxvi) Prescribed m eans prescribed by the regulations to this Act.
(xxvii) Private Company m eans a com pany w hich,by its A rticles,
(a) restricts the right to transfer its shares, if any; and
(b) limits its members to such numbers as may be prescribed by the Royal Securities Exchange of Bhutan Limited but not including -
(1) persons who are in the employment of the company, and
(2) persons who having been formerly in the employment of the company and were members of the company while in that employment and have continued to be members after the employment ceased; and
(c) prohibits any invitation to the public to subscribe for any securities of the company : Provided that where two or more persons hold one or more shares in a company jointly, they shall, for the purposes of this definition, be treated as a single member,
(xxviii) Public company m eans a com pany w hich is nota private com pany.
(xxix) Prospectus m eans any docum ent described or issued as a prospectus, and includes any notice, circular, advertisement or other document inviting offers from the public for the subscription or purchase of any securities of a body corporate.
(xxx) Registrar m eans the R egistrar of C om panies appointed by the Ministry.
(xxxi) Royal Audit Authority means the Royal Audit Authority, Royal Government of Bhutan.
(xxxii) Securities include
(i) shares, scrips, stocks, bonds, debentures, debenture stock or other marketable securities of a like nature in or of any incorporated company or any body corporate;
(ii) such other instruments as may be declared by the Government to be securities; and
(iii) rights or interests in securities.
(xxxiii) Securities Exchange m eans the Royal Securities Exchange of Bhutan Limited having its registered office at Thimphu.
(xxxiv) Share m eans a share in the share capital of a com pany, and includes stock, except where a distinction between stock and share is expressed or implied.
(xxxv) Shareholder or m em ber in relation to a com pany,m eans -
(a) the subscribers to the Articles of the company who shall be deemed to have agreed to become shareholders of the company and on its incorporation shall be entered as shareholders in the register of shareholders;
(b) every other person who agrees in writing to become a shareholder of the company and whose name is entered in the register of shareholders; and
(c) every other person holding equity share capital of the company and whose name is entered as beneficial owner in the records of the depository shall be deemed to be a shareholder of the concerned company : Provided that a person cannot hold shares, who is -
(i) less than 18 years of age;
(ii) of unsound mind and has been declared so by a court in Bhutan;
(iii) insolvent and has been declared so by a court in Bhutan;
(iv) not a citizen of Bhutan : Provided further that a person who is not a citizen of Bhutan or a foreign company may hold shares, by allotment or by transfer, in a company with the previous approval of the Government.
(xxxvi) Subsidiary Company m eans com pany deem ed to be a subsidiary company of another where -
(i) that other holds more than fifty per cent in value of its paid up equity share capital; or
(ii) that other can control the composition of its Board of Directors by the exercise of any power at its discretion without the consent or concurrence of any other person to appoint or remove a majority of the directors.
(2) Words importing the masculine gender also include the feminine gender.
(3) Words importing the singular number also include the plural number and vice versa.
(4)The Schedules to this Act forms part of this Act and have the same force and effect as though set out in full in this Act and terms used in a Schedule that are defined in this Act have the same meanings in the Schedule as are provided by this Act.
PART - II
INCORPORATION OF A COMPANY AND MATTERS INCIDENTAL THERETO
General Provisions
3. Mode of Incorporation
(1) Any two or more persons, associated for any lawful purpose may, by subscribing their names to the Articles and otherwise complying with the provisions of this Act in respect of incorporation, form an incorporated company having the liability of its shareholders limited by the Articles to the amount, if any, unpaid on the shares held by them.
(2) The requirement of a minimum number of persons shall not be applicable in case of Government Companies.
(3) In case of a wholly owned subsidiary, the shares may be subscribed by the holding company and its nominees for and on behalf of the holding company.
(4) No company shall be incorporated with a name which, in the opinion of the Registrar, is undesirable or is identical with, or too nearly resembles the name by which a company in existence has been previously registered.
(5) The promoters shall, before filing documents for registration, obtain clearance of the proposed name of the company from the Registrar.
4. Requirements with respect to Articles
(1) The Articles of every company shall state -
(a) the nam e of the com pany w ith L im ited as the last w ord of the nam e in case of a public lim ited com pany and w ith P rivate L im ited as the last w ords of the name in case of a private limited company;
(b) the place where the registered office of the company will be situated;
(c) the objects of the company comprising:
(i) the main objects to be pursued by the company on its incorporation;
(ii) objects incidental or ancillary to the attainment of the main objects; and
(iii) other objects of the company.
(d) the liability of its shareholders is limited
(e) the authorised share capital of the company
(f) the regulations of the company
(g) the subscription to the effect that each subscriber agreed to take the number of equity shares in the capital of the company as stated therein.
(2) The Articles of a company shall be in the form set out in Schedule I or as near thereto as circumstances admit.
(3) A private or a Government company may adopt all or any of the regulations contained in Schedule I as admissible under the Act.
(4) The Articles shall be printed, whether by letter press or in lithograph or by any electronic means, divided into paragraphs, numbered consecutively, and be signed by each subscriber, who shall add his name, description, address and occupation, if any, in the presence of at least one witness who shall likewise add his name, description, address and occupation, if any.
5. Registration of Company
(1) There shall be presented for registration to the Registrar -
(a) Articles of Incorporation
(b) Names and addresses of first directors and the Chief Executive Officer
(c) Consent to act as directors by the first directors in the form set out in Schedule II.
(d) A declaration by one or more of directors that all the requirements of this Act have been complied with in respect of registration, in the form set out in Schedule III.
(2) The aforesaid documents shall be accompanied by registration fees as prescribed in Schedule IV.
(3) If the Registrar is satisfied that all requirements have been complied with by the company and it is authorized to be registered under this Act, he shall issue the Certificate of Incorporation in the form set out in Schedule V.
(4) From the date of incorporation mentioned in the Certificate of Incorporation, the company shall be a body corporate capable forthwith of exercising all the powers and functions of an incorporated company having perpetual succession and common seal with limited liability of its shareholders, including but not limited to the right:
(a) to carry on its business as per its objects under the Articles;
(b) to sue or to be sued;
(c) to buy, hold, sell or transfer property and assets of the company;
(d) to execute, endorse or deal with deeds, negotiable instruments, bills of exchange or promissory note;
(e) to enter into contract with any person.
(5) Where an activity is undertaken by the company which is ultra vires its Articles, apart from punishment under the Act, all its directors shall be jointly and severally liable for the loss, if any, sustained by the company in this behalf.
(6) A Certificate of Incorporation issued by the Registrar shall be conclusive evidence that all the requirements of this Act have been complied with respect to registration and the Articles shall bind the company and the shareholders.
6. Penalty for im proper use of w ords "Limited" and "Private Limited"
If any person or persons trade or carry on business under any name of which the word L im ited or the w ords P rivate L im ited form s a part,the R egistrar may impose on that person or each of those persons, unless duly incorporated under this Act, a fine which, may extend to Nu. 1000 and a further fine upto Nu. 50 per day till the default is rectified.
7. Alteration of Articles
A company shall not alter any provision contained in the Articles except with the approval of the company by special resolution and approval of the Registrar on payment of fee prescribed in Schedule IV.
8. Change of name
(1) Subject to sub-section (3) of section 3 and section 7, a company may change its name and the Registrar shall issue a fresh Certificate of Incorporation with the changed name in the form set out in Schedule V and shall also make necessary alteration in the Articles of the company.
(2) The change of name shall not affect any rights or obligations of the company, or render defective any legal proceedings by or against it; and any legal proceeding which might have continued or commenced by or against the company by its former name may be continued by or against the company by its new name.
9. Increase or consolidation of share capital or conversion of shares into stock, etc.
(1) If a company having a share capital has -
(a) increased its share capital beyond the authorised share capital;
(b) consolidated and divided its share capital into shares of larger amount than its existing shares;
(c) converted any shares into stock;
(d) re-converted any stock into shares;
(e) sub-divided its shares or any of them;
(f) redeemed any redeemable preference shares; or
(g) cancelled any shares, otherwise than in connection with a reduction of share capital under section 10 ; the company shall within thirty days after doing so, file certified copy of the ordinary resolution passed in the general meeting in this behalf with the Registrar, accompanied by the fee prescribed in Schedule IV who shall thereupon record the resolution and make any alterations which may be necessary in the Articles of the company.
10. Reduction of share capital
(1) Subject to the approval by the Ministry, a company limited by shares, may, if so authorised by its Articles, by special resolution, reduce its share capital in any way, and in particular and without prejudice to the generality of the foregoing power, may -
(a) extinguish or reduce the liability of any of its shares in respect of share capital not paid-up;
(b) either with or without extinguishing or reducing liability on any of its shares, cancel any paid-up share capital which is lost, or is unrepresented by available assets; or
(c) either with or without extinguishing or reducing liability on any of its shares, pay off any paid-up share capital which is in excess of the wants of the company; and may, if and so far as is necessary, alter its Articles by reducing the amount of its share capital and of its shares accordingly.
(2) The company shall file a petition with the Ministry for approval of a reduction of the share capital and the petition shall be heard by the Ministry in accordance with the procedure prescribed in the Regulations.
(3) Any reduction of capital by a public company shall be notified by the company to the Securities Exchange and the reduction shall take effect from the date of receipt by the company of a confirmation of the same from the Securities Exchange.
11. Solvency test
A company shall not take any action to extinguish or reduce its stated capital if there are reasonable grounds to believe that
(a) the company is or, after taking such action , would be unable to pay its liabilities as they become due; or
(b) after taking of such action, the realizable value of the company's assets could be less than the aggregate of its liabilities.
12. Transitional provisions as to existing private limited companies A company which was a private limited company immediately before the commencement of this Act shall within one month from the date of such commencement alter its Articles under section 7 to incorporate the restrictions contained in section 2 (xxvii) and thereupon, the R egistrar shall enter the w ord P rivate before the w ord L im ited in the name of the company in the Certificate of incorporation and the Articles.
13. Conversion of private company into public company
(1) If a private company alters its Articles in such a manner that it no longer includes the restrictions provided in section 2 (xxvii), the company shall cease to be a private company on the date of such alteration.
(2) The company shall forthwith inform the Registrar that it has become a public company, and thereupon the R egistrar shall delete the word P rivate before the w ord Limited in the name of the company in the C ertificate of Incorporation and Articles of the company.
14. Service of documents on company
A letter, notice or document may be served on the company or any director thereof by sending it to the company or director at the registered office of the company by registered post or by leaving it at its registered office.
15. Service of documents on shareholders
(1) A letter, notice or document may be served by a company on any shareholder thereof either personally or by sending it by post to him at his registered address in Bhutan.
(2) Where a document is sent by post, service shall be deemed to be effected at the expiration of four days after the same was posted.
(3) Where a member has intimated to the company in advance that notice or document should be sent to him by registered post or by any other means of communication and has deposited with the company a sum sufficient to defray the expenses thereof, service shall not be deemed to be effected unless it is sent in the manner intimated by the shareholder.
16. Restriction on commencement of business
(1) A company shall not commence its business after incorporation unless the company has obtained a licence in this behalf from the Ministry and copy thereof filed with the Registrar within seven days of its receipt.
(2) No licence shall be granted by the Ministry under sub-section (1) unless the company has produced documentary evidence relating to purchase of property or assets, and operation of account in a bank in the name of the company.
PART - III
SHARE CAPITALAND DEBENTURES
Shares and Share Capital
17. Nature of shares etc., and nomination
(1) The shares, debentures or other interest of any member in a company shall be movable property transferable in accordance with the provisions of this Act.
(2) Each share in a company having a share capital shall be distinguished by its appropriate number: Provided that nothing in this section shall apply to shares held with a depository.
(3) Every holder of shares in, or holder of debentures of, a company may, at any time nominate, a person to whom his shares in, or debentures of, the company shall vest in the event of his death, notwithstanding anything contained in any other law for the time being in force, whether testamentary or otherwise.
(4) Where the nominee is a minor, it shall be lawful for the holder of shares or debentures making the nomination to appoint any person to become entitled to shares or debentures of the company, in the event of his death during minority.
18. Kinds of share capital
(1) The share capital of a company limited by shares, shall be of two kinds, namely :-
(a) Equity share capital; and
(b) Preference share capital.
(2) Preference share capital m eans that part of the share capital of the com pany which fulfils both the following requirements, namely :-
(a) that as respects dividends, it carries a preferential right to be paid a fixed amount or an amount calculated at fixed rate; and
(b) that as respects capital, it carries on a winding up or repayment of capital, a preferential right to be repaid the amount of the capital paid-up.
(3) Equity share capital m eans all share capital w hich is not preference share capital, and the expression preference share and equity share shall be construed accordingly.
(4) Where the Articles of a company provides for one class of shares, such shares shallbe referred to as Equity shares.
19. Further issue of capital
(1) Where it is proposed to increase the subscribed capital of the company by allotment of further shares, then,
(a) such further shares shall be offered to the persons who, at the date of the offer, are members holding equity shares of the company, in proportion, as nearly as circumstances admit, to the capital paid-up on those shares at that date;
(b) the offer aforesaid shall be made by notice containing terms of issue and specifying the number of shares offered and limiting a time, not being less than fifteen days from the date of the offer within which the offer, if not accepted, shall be deemed to have been declined;
(c) the offer aforesaid shall be deemed to include a right to renounce the shares offered in favour of any other person; and notice referred to in clause (b) shall contain a statement of this right;
(d) after the expiry of the time specified in the notice aforesaid, or on receipt of intimation from the person that he declines to accept the shares offered, the Board of directors may dispose of them in such manner as they think most beneficial to the company.
(2) Notwithstanding anything contained in sub-section (1), further shares may be offered to any person or persons whether or not those persons include the persons referred to in clause (a) of sub-section (1) in any manner whatsoever, if a special resolution to that effect is passed by the company in general meeting.
(3) Nothing in this section shall apply to a private company and the Board of directors of such a company may issue further shares as they think most beneficial to the company. Issue of Shares
20. Issue of shares at a premium
(1) A company may, with the consent of the general meeting by special resolution, issue shares at a premium and the amount of premium shall be transferred to an accountto be called the share prem ium account.
(2) The share premium account may be applied by the company -
(a) in paying up unissued shares of the company to be issued to members of the company as fully paid bonus shares;
(b) in writing off the preliminary expenses of the company;
(c) in writing off the expenses of, or the commission paid or discount allowed on, any issue of shares of the company; or
(d) in providing for the premium payable on the redemption of any redeemable preference shares or of any debentures of the company
21. Issue of shares at a discount
(1) A company may issue, at a discount, shares of a class already issued if the following conditions are fulfilled, namely :-
(a) the issue is authorised by a special resolution passed in the general meeting and sanctioned by the Ministry;
(b) the company has filed its first audited annual accounts.
(2) A company may apply to the Ministry on payment of fee prescribed in Schedule IV for an order sanctioning the issue of shares at a discount, and , on such application, the Ministry may, if it thinks proper having regard to all the circumstances, make an order sanctioning the issue on such terms and conditions as it thinks fit.
(3) The company shall file with the Registrar a copy of the order of the Ministry and the particulars of shares issued at a discount within fifteen days of allotment thereof. Issue of Preference Shares
22. Power to issue redeemable preference shares etc.
(1) A company limited by shares may , if so authorised by Articles, issue preference shares which are, or at the option of the company, liable to be redeemed. Provided that -
(a) no such shares shall be redeemed except out of profits of the company which would otherwise be available for dividend or out of the proceeds of a fresh issue of shares made for the purposes of the redemption.
(b) no such shares shall be redeemed unless they are fully paid-up;
(c) the premium, if any, payable on redemption shall have been provided out of profits of the com pany or outof com pany`s share prem ium accountbefore the shares are redeemed;
(d) where any such shares are redeemed otherwise than out of the proceeds of a fresh issue, there shall be transferred out of profits which would otherwise have been available for dividend a sum equal to the nominal amount of the shares redeemed to a reserve fund to be called the capitalredem ption reserve account.
(2) The redemption of preference shares under this section by a company shall not be taken as reducing the amount of its share capital.
(3) Notwithstanding anything contained in this section, no company limited by shares shall issue any preference share which is irredeemable or is redeemable after the expiry of ten years from the date of its issue.
(4) Redeemable preference shares issued by a company shall be of two kinds, namely :-
(a) Redeemable cumulative preference shares; and
(b) Redeemable non-cumulative preference shares. R edeem able cum ulative preference shares m eans the shares in respect of w hich the dividend payable at fixed rates remaining unpaid due to loss or inadequacy of profits shall be accumulated and become payable out of profits in the subsequent year or years. redeem able non-cum ulative preference shares be construed accordingly.
23. Application for and allotment of shares
(1) Every person intending to become a shareholder (other than a subscriber to the Articles) shall make an application for allotment of shares in writing along with the amount payable on the application within such time as may be prescribed by the company : Provided that the amount payable on application shall not be less than twenty five per cent of the nominal amount payable on shares.
(2) The Board of directors may allot the shares issued at par, or at premium or at a discount under the provisions of this Act. Share Certificates
24. Public companies not to issue share certificates
(1) From the date of commencement of this Act, no public company shall issue certificate of share or shares except a Global Share Certificate representing all outstanding shares and such global certificate shall be deposited with a depository in accordance with the Rules of the Securities Exchange.
(2) The provisions of this section shall apply to debentures issued by public companies.
25. Issue of share certificates by private companies only
(1) Only private companies shall issue certificate of any share or shares in the company:
(i) in pursuance of a resolution passed by the Board or a committee thereof, and
(ii) on surrender to the company of its letter of allotment, if any, save in cases of issues against letters of acceptance or renunciation, or in cases of issue of bonus shares.
(2) No certificate of any share or shares shall be issued in exchange for those which are sub-divided or consolidated or in replacement of those which are defaced, torn, worn out, or in which space for recording transfers have been duly utilised, unless the certificate in lieu of which it is to be issued is surrendered to the company : Provided that the company may charge such fee, if any, not exceeding Nu. 10 per certificate issued on splitting or consolidation of share certificates or in replacement of share certificates that are defaced or torn, as the Board thinks fit.
(3) No duplicate share certificate shall be issued in lieu of those that are lost or destroyed without prior consent of the Board or its committee thereof or without payment of such fee, if any, not exceeding Nu. 10 and on such reasonable terms, if any, as to evidence and indemnity and the payment of out-of-pocket expenses incurred by the company in investigating evidence by issue of public notice or otherwise as the Board or its committee thinks fit.
(4) Every share certificate shall be in the form prescribed in Schedule VI, and shall be issued under the seal of the company to be affixed in the presence of two directors, and the Chief Executive Officer.
(5) A share certificate issued under this section shall be prima facie evidence of the title of the member to such shares and shall be delivered to the member concerned within one month from the date of allotment.
(6) All blank forms to be used for issue of share certificates shall be printed and the printing shall be done only on the authority of a resolution of the Board or a committee thereof. The blank forms shall be consecutively machine-numbered and shall be kept in the custody of such person as the Board may appoint for the purpose.
(7) The provisions of this section shall apply to debenture certificates or as nearly thereto as circumstances admit.
26. Voting rights, proxy and poll
(1) Every equity shareholder shall have a right to vote on every resolution placed before the general meeting of the company where -
(a) on a show of hands, he shall have one vote; and
(b) on a poll he shall have as many votes as the number of shares held by him.
(2) Every preference shareholder shall have the right to vote like an equity share holder only on resolutions placed before the general meeting of the company which directly affect the rights attached to his preference share, and on every resolution placed before the general meeting, if the dividend due on such capital has remained unpaid for two consecutive financial years.
(3) No shareholder shall be entitled to vote at any general meeting unless all the calls or other sums presently payable by him in respect of shares in the company have been paid.
(4) A shareholder may appoint another person as his proxy to attend and vote at any general meeting, but a proxy so appointed shall not have any right to speak at the meeting, and shall not be entitled to vote except on a poll. An instrument appointing a proxy shall be in the form set out in Schedule VII.
(5) A poll may be ordered to be taken by the Chairman of the general meeting on his own motion or shall be ordered to be taken on demand -
(a) in case of a public limited company, by shareholder(s) present in person or by proxy holding ten percent of the total number of shares of the company;
(b) in case of a private limited company, by two shareholders present in person or by proxy. Lien and Call on Shares
27. Lien on shares
(1) The company shall have a first and paramount lien -
(a) on every share, not being a fully paid share, for all moneys (whether presently payable or not) called, or payable at a fixed time, in respect of that share; and
(b) on all shares, not being fully paid shares, standing registered in the name of a single person, for all moneys presently payable by him or his estate to the company: Provided that the Board of directors may at any time declare any share to be wholly or in part exempt from the provisions of this clause.
(2) T he com pany`s lien, if any, on a share shall extend to all dividends payable thereon.
28. Uniform call on shares
(1) Where call on shares for further share capital are made, such calls shall be made on a uniform basis for shares falling in the same class.
(2) For purpose of subsection (1), shares of the same nominal value on which different amounts have been paid up shall not be deemed to fall under the same class. Buy back of shares
29. Buy-back of own shares
(1) No company shall have the power to buy its own shares except and subject to such restrictions or limitations specified in this section.
(2) No company shall give loan or provide any financial assistance, directly or indirectly, for purchase or subscription of its shares. Provided that nothing in this section shall prohibit:
(a) the lending of money by a financial institution in the ordinary course of its business; or
(b) the provision by a company, in accordance with any scheme of money for purchase of fully paid up shares by its employees, including its Chief Executive Officer and other working directors holding salaried office.
(3) A company shall have the right to buy back its own shares from out of its free reserves, share premium account or the proceeds of a prior issue made specifically for the purpose of buy-back under this section, if:
(a) the company has authorised such buy-back by a special resolution in that behalf in general meeting;
(b) the company shall, after completion of the buy-back have a debt-equity ratio not exceeding 2:1 or such higher ratio as may be prescribed.
(4) The buy-back under this section may be:
(a) from the existing shareholders on a proportionate basis; or
(b) from the open market; or
(c) from odd lots, this is to say, where the lot of securities in a listed company is smaller than such market lot as may be specified by the Securities Exchange; or
(d) by purchasing the securities issued to the employees of the company, pursuant to a scheme of stock option; or
(e) in any other manner approved by the Government. Provided further that there are reasonable grounds for believing that, -
(i) the company is or, after the buy-back, would be able to pay its debts and liabilities as they become due; and
(ii) after the buy-back, the realisable value of the com pany`s assets w ould not be less than the aggregate of its debts and liabilities. Provided that the buy-back is subject to the approval of the Government on payment of fee as prescribed in Schedule IV.
(5) The buy back of its shares by a public company shall be transacted through the facilities of the Securities Exchange.
(6) Where a company buys back its own securities, it shall either cancel the securities so bought back or if it is proposed to re-issue such securities they shall not be re- issued before the expiry of a period of twenty four months from the date of the last buy back of securities : Provided that no such restriction shall apply to securities bought under clauses (c), (d) or (e) of sub-section (4); Provided further that no bought back shares will qualify for :-
(a) any voting or dividend rights at any time;
(b) the issue of any bonus or rights shares after the expiry of the said period, but before they are re-issued.
(7) Where a company completes a buy-back of its securities under this section, it shall not make further issue of securities within a period of twelve months, except by way of bonus issue or in the discharge of subsisting obligations such as conversion of preference shares into equity shares or debentures.
(8) If a company makes default in complying with the provisions of this section, the company and its directors shall be punishable with imprisonment according to the law of the land or with fine which may extend to Nu.10,000 or with both. Transfer and Transmission
30. Transfer of shares and debentures
(1) A company shall not register a transfer of shares in, or debentures of, the company unless an instrument of transfer in the form specified in Schedule VIII executed by or on behalf of the transferor and transferee has been delivered to the company along with:
(a) in the case of a public company, a trade confirmation note of the dealing broker confirming the relevant transaction;
(b) in the case of a private company, the certificate relating to the share or debenture as the case may be.
(2) Nothing in this section shall prejudice any power of the private company under its Articles to enforce the restrictions contained therein against the right to transfer the shares of such company.
(3) Subject to the provisions of this section, the shares or debentures of a public company shall be freely transferable.
(4) The shares in, or debentures of, the company shall be transmitted on the death of the holder thereof in the name of the nominee, failing which the Board may transmit the shares or debentures, as the case may be, in the name of the legal heir(s) on production of order of the court. Provided that the Board may transmit the shares or debentures on production of indemnity bond, if so satisfied.
(5) If a company does not transfer the shares in, or debentures of, a company, within one month from the date of lodgement of the instrument of transfer and the trade confirmation note or certificate as the case may be in respect of the share or debenture concerned or default is made, or unnecessary delay takes place in entering in the register of shareholders the fact of any person having become, or ceased to be a shareholder, the person aggrieved, or any shareholder of the company, or the company itself may appeal to the Ministry on payment of fee as prescribed in Schedule IV. The Ministry, after hearing the parties, may either dismiss the appeal or by order:
(a) direct that the transfer or transmission shall be registered by the company and the company shall comply with the order within ten days of the receipt of the order; or
(b) direct rectification of the register and also direct the company to pay damages, if any, sustained by the aggrieved party.
Debentures
31. Provisions as to debentures
(1) No company shall issue debentures which are not secured and which carries voting rights.
(2) Any provision contained in the trust deed for securing an issue of debentures shall be void in so far as it would have the effect of exempting a trustee from, or indemnifying him against, liability for breach of trust, where he fails to show the degree of care and diligence required of him as a trustee, having regard to the provisions of the trust deed conferring on him powers, authorities or discretions.
(3) Every trustee of a trust deed shall, in the case of debentures issued by a listed company, be subject to the rules and regulations made by the Securities Exchange.
(4) The provisions relating to shares in this act shall apply mutatis mutandis to the debentures issued by a company or as nearly thereto as circumstances admit. Register of Members
32. Register of shareholders and debenture holders
(1) Every company shall keep in one or more books a register of its shareholders and a register of debenture holders, maintained in any manner which is capable also of being retrieved by electronic means, and enter therein the following particulars, namely :
(a) The name and address of each shareholder and debenture holder;
(b) The shares held by each shareholder distinguishing each share by its number except where such shares are held with a depository or debentures held by each holder, distinguishing each debenture by its number except where such debentures are held with a depository;
(c) The date on which each person was entered in the register as a shareholder or debenture holder;
(d) the date on which any person ceased to be a shareholder or debenture holder; and
(e) Person or persons nominated in the event of the death of shareholder or debenture holder.
(2) A company may, after giving not less than seven days previous notice by advertisement in the newspaper, close the register of shareholders or debenture holders for any period or periods not exceeding in the aggregate thirty days in a year, but not exceeding fifteen days at any one time.
(3) The register of beneficial owners maintained by a depository shall be deemed to be a register of shareholders or debenture holders, as the case may be, for the purposes of this Act.
(4) No notice of any trust, express, implied or constructive, shall be entered on the register of shareholders or debenture holders and the shares held by a minor or a trust shall be held in the name of guardian or trustees, as the case may be.
PART IV
PROSPECTUS, LISTING AND OTHER MATTERS RELATING TO ISSUE OF SECURITIES
33. Matters to be stated in prospectus
(1) A prospectus issued by or on behalf of a public company, or in relation to intended company, shall be dated and that date shall be taken to be the date of publication of the prospectus.
(2) Every prospectus issued by or on behalf of a public company for issue of securities to the public, shall state such matters, set out such reports, and have effect subject to, such provisions as may be contained in Schedule IX.
(3) Where any prospectus is published as a newspaper advertisement, or in any other manner, it shall be in the form of an abridged prospectus, as prescribed by the Securities Exchange.
(4) No one shall issue any form of application for securities of a company unless the form is accompanied by a prospectus or an abridged prospectus.
(5) A prospectus shall not include a statement by an expert, unless the expert is not, and has not been, engaged or interested in the promotion or management of the company.
34. Registration of prospectus
(1) No prospectus shall be issued unless there has been delivered for registration to the Registrar a copy thereof signed by the Chief Executive Officer and other directors.
(2) A copy of prospectus shall simultaneously be delivered by the company to the Securities Exchange.
35. Liability for mis-statement in prospectus
(1) Where a prospectus includes any untrue statement or any statement, promise or forecast is made which is false, deceptive or misleading or by any dishonest concealment of material facts, induces or attempts to induce any person to subscribe for shares in, or debentures of, a company and its directors and the Chief Executive Officer shall be liable for imprisonment according to the law of the land.
(2) In case of untrue statement in the prospectus, the directors and the Chief Executive Officer of the company shall be liable to pay compensation for the loss or damages suffered by an investor, as may be determined by the High Court, on a petition made by an investor or jointly by the investors.
(3) For purposes of this section -
(a) a statement included in a prospectus shall be deemed to be untrue, if the statement is misleading in the form and context in which it is included; and
(b) where the omission from a prospectus of any matter is calculated to mislead, the prospectus shall be deemed, in respect of such omission, to be a prospectus in which an untrue statement is included.
36. Private placement of shares
No offer or invitation shall be treated as made to the public under this Part and shall be treated as private placement of securities, if the offer or invitation can properly be so regarded, in all circumstances :
(a) as not being calculated to result, directly or indirectly, in the securities becoming available for subscription or purchase by persons other than those receiving it; or
(b) otherwise as being a domestic concern of the persons making and receiving the offer or invitation.
37. Prohibition of allotment
(1) Every company, intending to offer securities to the public for subscription by the issue of prospectus shall, before such issue, make an application to the Securities Exchange for permission for the shares or debentures intending to be so offered to be dealt through the Exchange.
(2) The Prospectus shall state that an application has been made to the Securities Exchange and any allotment made on an application in pursuance of such prospectus shall be void if the permission has not been granted and only on receipt of such permission, the allotment shall be made before the expiry of thirty days from the close of the subscription list.
(3) No allotment shall be made unless the amount stated in the prospectus as minimum subscription which, in opinion of the Board of directors, must be raised by the issue of share capital has been subscribed.
(4) All moneys received in pursuance to the prospectus shall be kept in a separate Bank account until the allotment is made.
(5) Where permission has not been applied for or such permission has not been granted by the Securities Exchange, the company shall forthwith repay the moneys received from the applicants within thirty days from the date of close of the subscription list and in case of delay, the moneys shall be repaid with interest at the rate of fifteen percent per annum.
(6) All moneys received from the applicants which are in excess of the application moneys relating to shares or debentures in respect of which allotment has been made, the company shall repay the moneys within forty five days from the date of close of subscription list and in case of delay, the moneys shall be repaid with interest at the rate of fifteen percent per annum.
38. Payment of commission
(1) A company may pay commission to any person, authorised by the Securities Exchange, in consideration of his procuring subscription or for underwriting any shares in, or debentures of, the company if the following conditions are fulfilled, namely :
(i) the payment is authorised by the Articles;
(ii) the commission payable does not exceed in case of shares, five percent of the price at which the shares are issued and in the case of debentures, two percent of the price at which the debentures are issued.
(iii) the amount or rate percent of the commission payable is disclosed in the prospectus filed with Registrar and a copy of the contract in this behalf is also filed with the Registrar along with the prospectus.
INSIDER TRADING AND TRADING OF SECURITIES
39. Insider trading
(1) No insider shall -
(a) either on his own behalf or on behalf of any other person, deal in securities of a company listed on the Securities Exchange on the basis of any unpublished price sensitive information;
(b) communicate any unpublished price sensitive information to any person, with or without his request for such information, except as required in the ordinary course of business or under any law; or
(c) counsel or procure any other person to deal in securities of any company on the basis of unpublished price sensitive information.
Explanation - For purposes of this section -
I. insider m eans any person who is or was connected with the company or is deemed to have been connected with the company, and who is reasonably expected to have access, by virtue of such connection, to unpublished price sensitive information in respect of securities of the company, or who has received or has had access to such unpublished price sensitive information.
II. person is deem ed to be a connected person if such person -
(i) is a holding or subsidiary company;
(ii) is an official or a member of the Securities Exchange, or a depository;
(iii) is a member of the Board of directors, or an employee of any financial institution;
(iv) is a relative of any of the aforesaid persons;
III. unpublished price sensitive inform ation m eans any inform ation w hich relates to the following matters or is of concern, directly or indirectly, to a company, and is not generally known or published by such company for general information, but which if published or known, is likely to materially affect the price of securities of that company in the market -
(i) financial results of the company;
(ii) intended declaration of dividend, both interim or final;
(iii) issue of shares by public, rights or bonus issue;
(iv) any major expansion plans or execution of new projects;
(v) amalgamation;
(vi) disposal of the whole or substantially the whole of the undertaking;
(vii) such other information as may affect the earnings of the company; and
(viii) any changes in policies, plans or operations of the company.
(2) Any insider who deals in securities or communicates any information or counsels any person dealing in securities in contravention of sub-section(1) shall be punishable with imprisonment according to the law of the land or with fine which may extend to Nu.10,000 or both.
(3) Where the Government, on the basis of information in its possession, is of the opinion that it is necessary to investigate and inspect the books of account, other records and documents of an insider, it may appoint an Inspector to submit his report within seven days of the conclusion of the investigation.
(4) On receipt of the report of investigation, the Government may communicate the findings of the report to the insider and call for its explanation or further information, if any, within such time as may be specified.
(5) On receipt of further information or explanation from the insider, the Government may without prejudice to its right to initiate criminal prosecution under sub-section (2), give such directions to protect the interest of investors and in the interest of the securities market and for due compliance of the provisions of this Act, as it deems fit for all or any of the following purposes, namely :-
(i) directing the insider not deal in securities in any particular manner;
(ii) prohibiting the insider from disposing of any of the securities acquired in violation of this section;
(iii) restraining the insider to communicate or counsel any person to deal in securities.
40. Trading of securities issued to public
(1) All trading of securities issued to the public, unless otherwise approved or exempted by the Securities Exchange, shall be carried through the facilities provided by the Exchange.
(2) The company, which has issued securities to the public, shall abide by the rules and regulations of the Securities Exchange.
Part V
RIGHTS AND OBLIGATION OF DEPOSITORIES, PARTICIPANTS, ISSUERS AND BENEFICIAL OWNERS
41. Services of Depository
(1) Any person may open a securities account directly with a depository or sub- account with the participant for availing its services, as may be specified by the securities Exchange.
(2) A participant, may enter into agreement or memorandum of understanding, as may be specified by the securities Exchange, with a depository for availing its services.
(3) A depository shall have one or more participants or members as its agent.
(4) Any person, who has already opened securities account but holds physical share certificate in the depository shall surrender the physical certificate to the issuer for cancellation.
(5) The issuer, on receipt of a certificate of security under subsection (4), shall cancel the certificate and substitute in its record the name of the depository as the registered ow ner in respect of that security and shall issue a Global Share C ertificate' to the depository, as may be specified by the depository.
(6) The issuer during its public offer, shall issue a "Letter of Certificate" representing a global certificate for that issue, to the depository with such details of shares offered to public , and shall deposit the global share certificate within thirty days from the date of allotment.
42. Registration of transfer with depository
Every depository shall, on receipt of the intimation from a participant, register the transfer of security in the name of the transferee.
43. Securities to be held with depository
(1) Every person subscribing to securities offered by an issuer shall hold securities with a depository. The depository shall send confirmation statements to the beneficial owner from time to time.
(2) Where a person holds a securities account with a depository, the issuer shall intimate such depository the details of allotment of the security, and on receipt of such information the depository shall enter in its record the name of the allottee as the beneficial owner of that security.
44. Securities to be in fungible form
(1) All securities held by a depository shall be dematerialised and shall be in fungible form in such manner as may be prescribed by the Securities Exchange.
(2) The depository shall, for the dematerialisation of securities, send all the physical certificate of the securities to the issuer.
(3) The issuer on receipt of such securities shall enter in its record the depository as the registered ow ner and shall issue a global share certificate as under section 41(5) as often as may be required by the depository.
45. Rights of depositories and beneficial owners
(1) A depository shall be deemed to be the registered owner for the purpose of effecting transfer of ownership of security on behalf of a beneficial owner.
(2) Save as otherwise provided in subsection (1), the depository as a registered owner shall not have any voting rights or any other rights in respect of securities held by it.
(3) The beneficial owner shall be entitled to all the rights and benefits and be subjected to all the liabilities in respect of his securities held by the depository.
(4) Every depository shall maintain a book entry in the Register of Beneficial Owners.
(5) Every depository shall furnish to the issuer information about the transfer of securities in the name of beneficial owners at such intervals and in such manner as may be specified by the Securities Exchange.
(6) Every issuer shall make available to the depository copies of the relevant records in respect of securities held by such depository.
(7) The payment by the issuer to the depository of any dividend payable to the beneficial owner shall, to the extend of the payment made, discharge the company from any liability in respect of that payment.
(8) Where an issuer, in relation to any deposited security :
(i) Makes a bonus issue, or issues securities pursuant to a rights issue or the conversion of any debt securities;
(ii) Issues securities pursuant to an exercise of any right or option to acquire securities in the share capital of the issuer, the issuer shall notify the depository of the names of the allottees together with such particulars as may be required by the depository for the purpose of making appropriate entries in the depository of the beneficial owners.
46. Option to opt out in respect of any security
(1) Where a beneficial owner seeks to pledge his securities with any financial institution for availing loan or credit facilities, or for margin financing, the depository shall provide confirmation statements to beneficial owner and the financial institution.
(2) The depository shall, on receipt of intimation under sub-section (1), make appropriate entries in its records and put a lien on such security until the liquidation of such loan is intimated to the depository. Transaction of any collateral securities shall require a letter of undertaking from the financial institutions.
47. Depository to indemnify loss
(1) Any loss caused to the beneficial owner due to the negligence of the depository or the participant, the depository shall indemnify such beneficial owner.
(2) Where the loss due to the negligence of the participant under sub-section (1), is indemnified by the depository, the depository shall have the right to recover the same from such participant.
PART VI
REGISTRATION OF CHARGES
48. Register of charges to be maintained by Registrar
(1) The Registrar shall maintain a Register of Charges and shall issue certificate of charges as per its record.
(2) The particulars of the charges shall be in the Form specified in Schedule XI.
49. Registration of Charges
(1) Particulars of all mortgages and charges created by a company or any modification or satisfaction thereof shall be filed with the Registrar in the Form specified in Schedule X together with the instrument creating the charge, in duplicate, within thirty days thereof or such extended time as the Registrar may allow.
(2) The filing of mortgages and charges with the Registrar may be done either by the company or any interested person and where it is done by a person other than the company, the Registrar shall give notice of the particulars of the mortgages or charges to the company before registering the same in the Register.
(3) The Registrar shall on receipt of the prescribed particulars of the charge, after giving any notice to the company if required, register the same by affixing stamp on the relative form and accompanying instrument of charge under his signatures with date and copy thereof shall be returned to the company or the person who files the documents in this behalf.
(4) This section shall apply to all types of mortgages and the following types of charges
(a) a charge on any immovable property of a company ;
(b) a charge, including a pledge or hypothecation, on any movable property of a company;
(c) a floating charge on the undertaking or any property of a company, including stock-in-trade ;
(d) a charge on any other property or right of a company.
50. Charges not registered to be void against creditors
(1) Mortgages and charge created on the property and assets of the company shall be void against any creditor, including a liquidator, unless the particulars of the same are registered in the manner provided in section 49.
(2) Nothing in sub-section (1) shall prejudice any contract or obligation for the repayment of the money secured by the charge.
(3) When a charge becomes void under this section, the money secured thereby shall immediately become payable.
51. Modification of charge
Whenever the charge is modified, it shall be duty of the company to file with the Registrar the particulars of such modification in the form prescribed in Schedule X and the provisions of section 49 as to registration of charge shall apply to such modification of the charge.
52. Satisfaction of charge
(1) The company shall intimate to the Registrar of the payment or satisfaction in full, of any charge with prescribed particulars set out in Schedule X within thirty days from the date of such payment or satisfaction.
(2) The Registrar shall, on receipt of such intimation, cause a notice to be sent to the charge holder calling upon him to show cause within forty days, as to why payment or satisfaction should not be registered. If cause is shown and in the opinion of the Registrar the satisfaction cannot be registered, the Registrar shall inform the company accordingly. If no cause is shown within the prescribed period, the Registrar shall register the satisfaction of charge and the provisions of section 49 as to registration of charge shall apply to the registration of the satisfaction of charge.
53. Condonation of delay by Government The Government, on being satisfied that the delay in filing the charge, modification or satisfaction thereof with the Registrar was accidental, or due to inadvertence or due to some other sufficient cause, may on the application of the company or any person interested, direct that the filing of the particulars aforesaid shall be extended, on payment of fee not exceeding Nu. 2000 as it thinks fit.
PART VII
MANAGEMENT AND ADMINISTRATION
CHAPTER 1
GENERAL PROVISIONS
54. Registered Office of company
(1) A company shall have a registered office to which all communications and notices may be addressed.
(2) Notice of every change in the situation of the registered office shall be intimated to the Registrar within thirty days after the date of such change is approved by the Board of directors.
55. Publication of name by company Every company -
(a) shall paint or affix its name and the address of its registered office on the outside of every office or place in which its business is carried on, in a conspicuous place, in letters easily legible in Dzongkha and English language;
(b) shall have its name engraved on its seal; and
(c) shall have its name and the address of its registered office mentioned in all its business letters, bills, invoices, letter paper, notices, documents and other official publications.
56. Financial year of companies
(1) Every company shall have a uniform financial year ending on 31st December, every year, being the period to which its balance sheet and profit and loss account shall relate.
(2) The first financial year of the company shall relate to the period beginning from the date of incorporation of the company and ending on 31st December thereafter, and may be less or more than a calendar year, but it shall not exceed fifteen months: Provided that it may extend to eighteen months where special permission has been granted in that behalf by the Ministry on payment of fee prescribed in Schedule IV.
57. Annual return
(1) Every company shall prepare and file with the Registrar an annual return for the period relating to the financial year ended on 31st December, every year, containing the particulars specified in Schedule XII.
(2) Every listed company shall file the annual return with the Registrar on or before 31th May, and the other companies, namely, the unlisted public companies and private companies shall file the annual return with the Registrar on or before 31st July, every year, along with the balance sheet and profit & loss account for the year ended 31st December, auditors report and directors report duly authenticated by at least one director and the Chief Executive Officer.
58. Annual General Meeting
(1) Every company shall in each year hold in addition to any other meetings a general meeting as its annual general meeting and shall specify the meeting as such in the notice calling it.
(2) Every Annual General Meeting shall be convened on or before 30th April in case of listed company and on or before 30th June in case of any other Company for transacting the following business, among others -
(a) Consideration of audited accounts for the financial year ended 31st December of the previous year, audit report and directors report ;
(b) Declaration of dividend, if any;
(c) Appointment of directors;
(d) Appointment of, and the fixing the remuneration of auditors.
(3) In the event Annual General Meeting cannot be held on time, permission of the Registrar shall be obtained. However, the Annual General Meeting shall not be postponed beyond 30 days.
(4) In the case of a Government company, the business to be transacted in an Annual General Meeting may be conducted in a Board meeting within the time frame prescribed above. Notice calling the meeting shall refer it as Board cum Annual General Meeting.
59. Extraordinary general meeting
(1) Board of directors may convene an extra general meeting to transact any special business which may not wait till the annual general meeting is due to be held.
(2) The board of directors shall, on the requisition of ten percent of the shareholders, forthwith proceed duly to call an extra ordinary general meeting of the company.
(3) The requisition shall set out the matters for the consideration of which the meeting is to be called and shall be signed by the requisitionists; and shall be deposited with the registered office of the company.
(4) If the Board does not, within twenty one days from the date of receipt of valid requisition, proceed duly to call a meeting on a day not later than forty five days from the date of deposit of the requisition, the meeting shall be called by the requisitionists themselves at the registered office of the company or at the place where the registered office is situated, in the same manner, as nearly as possible, as that in which meetings are to be called by the Board.
(5) All reasonable expenses incurred by the requisitionists in calling and holding the meeting shall be repaid by the company.
60. Notice for calling general meetings
(1) A general meeting of a company may be called by giving not less than twenty one day`s notice in w riting.
(2) A general meeting may be called after giving shorter notice than that specified in sub-section (1) if the consent is accorded by at least ninety five percent of the shareholders of the company.
(3) Notice of every meeting of the company shall be given to every shareholder and the auditor or auditors of the company.
(4) The accidental omission to give notice to, or the non receipt of notice by any shareholder shall not invalidate the proceedings at the meeting.
(5) Where any item, other than the items specified in sub-section (2) of section 58, is to be transacted, there shall be annexed to the notice of the meeting an Explanatory statement setting out all material facts concerning such item of business, including in particular the nature of the concern or interest, if any, therein of any director.
61. Chairman of meeting
The Board of directors of the company shall appoint a director as chairman of the Board of directors, who shall also be the chairman of general meetings, failing him, the shareholders present at the meeting shall elect one of themselves to be the chairman of the meeting by show of hands.
62. Saving clause
Nothing in sections 60 and 61 shall apply to a private company unless otherwise specified in the Articles in this behalf.
63. Representation of corporations at meetings
A body corporate if it is a shareholder of a company, may by resolution of its board of directors authorise a person as it thinks fit to act as its representative at any meeting of the company.
64. Ordinary and special resolutions
(1) A resolution shall be an ordinary resolution when at a general meeting, the votes cast, whether on a show of hands or on a poll, in favour of resolution by shareholders who vote in person or by proxy, exceed the votes, if any, cast against the resolution by shareholders so entitled and voting.
(2) A resolution shall be a special resolution when-
(a) the intention to propose the resolution as a special resolution has been duly specified in the notice calling the general meeting; and
(b) the votes cast in favour of the resolution by shareholders being entitled so to do, vote in person or by proxy, are not less than three times the number of the votes, if any, cast against the resolution by shareholders so entitled and voting.
65. Minutes of general meetings and of Board
(1) Every company shall cause minutes of all proceedings of every general meeting and of all proceedings of every meeting of its Board of directors or of every committee of the Board, to be kept by making within thirty days of the conclusion of every such meeting concerned, entries thereof in books kept for that purpose with their pages consecutively numbered.
(2) Each page of every such book shall be initialed or signed at the last page of the minutes of each meeting shall be dated and signed -
(a) in case of minutes of the Board meetings or a committee thereof, by the Chairman of the said meeting or the Chairman of the next succeeding meeting;
(b) in case of minutes of a general meeting, by the Chairman of the same meeting within the aforesaid period of thirty days.
(3) In the case of a meeting of the Board of directors or a committee of the Board, the minutes shall contain the names of the directors present at the meetings and the names of directors, if any, dissenting from or not concurring in, the resolution.
(4) Minutes of the meetings kept under the section shall be evidence of the proceedings recorded therein and unless the contrary is proved, the meetings shall be deemed to have been duly called and held.
66. Declaration and payment of dividend
(1) No dividend shall be paid by a company for any financial year, except out of the distributable profits of the company for that year arrived at after providing for depreciation or out of the profits for any previous financial year or years.
(2) Distributable profits for this purpose shall mean accumulated realised profits so far as previously not utilised ( by way of dividend or capitalisation) less accumulated realised losses so far as not previously written off. Unrealised profits i.e., surplus on revaluation of fixed assets and related additional depreciation amount shall not be included to arrive at the amount of distributable profits.
(3) For the purpose of this section, depreciation shall be as prescribed by the Department of Revenue and Customs, Ministry of Finance, Royal Government of Bhutan.
(4) No dividend shall be paid except in cash, cheque and warrant. Provided that nothing in this sub-section shall be deemed to prohibit the capitalisation of profits or reserves of a company for the purpose of issuing fully paid up bonus shares.
(5) The dividend shall be paid to the shareholders within thirty(30) days from the date of its declaration in the Annual General Meeting of the company.
(6) Where a dividend is declared and not paid within thirty days to any shareholder entitled to the payment, interest @ of 15% p.a. shall be paid to the shareholder for the period of delay. Every director of the company shall, if he is knowingly a party to the default, be liable to contribute towards payment of interest. This sub-section shall not apply where dividend could not be paid due to uncertainty of the address of the shareholder.
(7) A public company shall not pay a dividend if it would reduce its net assets below the aggregate amount of its called-up share capital and undistributable reserves. Undistributable reserves are;
(a) share premium account ;
(b) capital redemption reserve ;
(c) unrealised profits (less unrealised losses unless previously written off) ; and
(d) any other reserves which the company is prohibited from distributing by any statute or by its articles of incorporation.
67. Books of Account to be kept by company
(1) Every company shall keep at its registered office proper books of accounts with respect to -
(a) all sums of money received and expended by the company and the matters in respect of which the receipt and expenditure take place ;
(b) all sales and purchases of goods by the company;
(c) the assets and liabilities of the company : Provided that all or any of the books of account aforesaid may be kept at such other place in Bhutan as the Board of directors may decide and when the Board of directors so decides, the company shall, within seven days of the decision intimate the Registrar giving the full address of that other place.
(2) Where the company has a branch office, whether in or outside Bhutan, the company shall be deemed to have complied with the provisions of sub-section (1), if proper books of account relating to the transactions effected at the branch office are kept at that office and proper summarised returns, made up to dates at intervals of not more than three months, are sent by the branch office to the company at its registered office or the other place referred to in sub-section (1).
(3) For the purposes of sub-sections (1) and (2), proper books of account shall not be deemed to be kept with respect to the matters specified therein -
(a) if such books are not kept as are necessary to give a true and fair view of the state of the affairs of the company or branch office, as the case may be, and to explain its transactions; and
(b) if such books are not kept on accrual basis and according to the double entry system of accounting.
(4) The books of account and other books and papers shall be open to inspection by any director during business hours.
(5) The books of account of every company relating to a period of not less than five years immediately preceding the current year together with the vouchers relevant to any entry in such books of account shall be preserved in good order.
68. Inspection of books of account, etc., of companies
(1) The books of account and other books and papers and statutory records of every company shall be open to inspection during business hours -
(i) by the Registrar, or
(ii) by such officer of Government as may be authorised by the Government in this behalf.
(2) it shall be the duty of every director, other officer or employee of the company to produce to the person making inspection under sub-section (1), all such books of account and other books and papers of the company in his custody or control and to furnish him with any statement, information or explanation relating to the affairs of the company as the said person may require of him within such time and at such place as he may specify.
(3) If default is made in complying with the provisions of this section, the Chief Executive Officer and every director of the company, shall be punishable with imprisonment according to the law of the land and fine which shall be not less than Nu.5000.
69. Annual Accounts and balance sheet, etc.
(1) At every Annual General Meeting, the Board of Directors of a company shall lay before the meeting, a balance sheet as at the financial year end, profit & loss account and cash flow statement for the year ended 31st December, every year.
(2) Every balance sheet, profit & loss account and cash flow statement shall be prepared so as to give a true and fair view of state of affairs of the company as at the financial year end, of its profit or loss and movement of liquid resources for the year ended 31st December, every year in the formats as set out in Schedule XIII A and XIII B
(3) The annual accounts of a company shall be approved by the Board of Directors and shall be authenticated by not less than one director and the Chief Executive Officer on behalf of the Board of Directors.
70. Filing of balance sheet etc. with the Registrar
(1) After the balance sheet, profit & loss account and cash flow statement duly audited, have been laid before the Annual General Meeting, a copy thereof as well as Directors' report shall be filed with the Registrar along with Annual Return under section 57.
71. Board's report
(1) There Shall be attached to the annual accounts laid before the annual General meeting, report of its Board of directors, with respect to -
(a) the state of com pany`s affairs;
(b) the amount, if any which it proposes to transfer to any reserves;
(c) the amount, if any, recommended for payment of dividend;
(d) explanation or information on every reservation, qualification or adverse remark contained in the auditor's report.
(2) T he B oard`s report shall be signed by the C hairm an of the B oard of directors and in his absence the same shall be signed by the director or directors, including Chief Executive Officer, authorised in this behalf by the Board.
72. Appointment and removal of Auditors
(1) Every company shall, at each Annual General Meeting , appoint auditors or joint auditors, out of the panel of auditors maintained by the Royal Audit Authority, to hold office from the conclusion of that meeting to until the conclusion of next Annual General Meeting. Provided that the same auditor shall not be appointed for more than three consecutive financial years, except with the previous written approval of the Royal Audit Authority.
(2) In case of a government and government controlled company, the Auditor General of Bhutan shall be the ex-officio auditor. The auditor/joint auditors shall be appointed or re- appointed by the Royal Audit Authority who may designate its own auditors to conduct the audit. The Royal Audit Authority shall have power; a) to direct the manner in which the company's accounts shall be audited by the auditor so appointed and to give instructions in regard to any matter relating to the performance of his functions as such; b) to conduct a supplementary or test audit of company's accounts by such persons or person s as it may authorise on its behalf; c) to fix remuneration and other expenses of auditors; d) to remove the auditor appointed by it before the expiry of his term.
(3) Where at an Annual General Meeting, no auditors are appointed or re- appointed, the company shall give notice of this fact to the Ministry within seven days of the meeting, whereupon the Ministry in consultation with the Royal Audit Authority shall appoint the auditors and fix their remuneration.
(4) The first auditors of the company shall be appointed out of panel of auditors maintained by the Royal Audit Authority and their remuneration shall be fixed by the Board of Directors and shall hold office until the conclusion of the first Annual General Meeting.
(5) An auditor appointed under this section in the general meeting can be removed before the expiry of his term only by the company in general meeting by a special resolution and with the prior approval of the appointing authority and the company shall notify the registrar of the removal of the auditor within 15 days of the passing of resolution.
(6) The auditor proposed to be removed shall have the rights to -
(a) Receive special notice of general meeting at which resolution is to be put up to the shareholders relating to his proposed removal from office; and
(b) Right to make written representation, to deliver it to the company and to circulate them to the shareholders prior to the general meeting.
73. Resignation of Auditor from Office.
(1) An auditor wishing to resign during his term of office must give notice in writing and deliver it to the registered office of the company.
(2) Resignation takes effect from the date of deposit of his resignation letter to the company unless a latter date is specified and must be accompanied by one or two statement either a statement of circumstances leading to his resignation which the auditor wishes to bring to the attention of the shareholders or appointing authority or positive statement that there are no such circumstances.
(3) In the case of former the auditor can additionally request the company to convene an extraordinary general meeting with a minimum of 14 days notice to discuss the circumstances leading to his resignation.
74. Powers and duties of auditors
(1) Every auditor of a company shall have right of access at all times to the books of accounts and records of the company, and shall be entitled to require from the officers of the company such information and explanation as the auditor may think necessary for the performance of his duties as auditor.
(2) The auditor shall make a report to the member(s) of the company on the accounts examined by him (viz., balance sheet, profit and loss account and cash flow statement) and on every other document declared by this Act to be part of or annexed to the balance sheet, profit and loss account and cash flow statement, which are laid before the company in general meeting during his tenure of office, and the report shall state as to whether, in his opinion and to the best of his information and according to the explanation given to him, the said accounts give the information required by this Act in the manner so required and give a true and fair view -
(a) in the case of the balance sheet, of the state of the company's affairs as at the end of its financial year;
(b) in the case of profit and loss account, of the profit or loss for the financial year; and
(c) in the case of cash flow statement, of the movement of cash during the financial year.
(3) The auditor shall also state-
(a) whether he has obtained all the information and explanations to the best of his knowledge and belief were necessary for the purposes of his audit;
(b) whether, in his opinion proper books of accounts have been kept by the company so far as it appears from his examination of those books proper returns adequate for the purposes of his audit have been received from the branches not visited by him; and
(c) whether the company's balance sheet, profit & loss account and cash flow statement are in agreement with the books of accounts and returns.
75. Auditing Standards
The auditor shall conduct the audit in accordance with the generally accepted auditing standards and in keeping with the General Terms of Reference and Minimum Audit Examination and Reporting Requirements issued by the Royal Audit Authority, annexed hereto as Schedule XIV, and as may be revised and circulated by the said Authority from time to time.
CHAPTER II
DIRECTORS AND THEIR POWERS
76. Number of directors
(1) Every public company shall have at least three directors and every private company shall have at least two directors.
(2) The subscribers to the Articles who are individuals, shall be deemed to be the directors of the company until the directors are duly appointed in the general meeting. Comment [SL
(3) Unless the Articles provide for retirement of all directors at every annual general meeting, not less than one-third of the total number of directors of a public company shall retire by rotation and the remaining directors in case of such company shall, in default of and subject to any provision in Articles, also be appointed by the company in general meeting.
77. Additional directors
The Board of directors may appoint an additional director, as deemed fit, who shall hold office only upto the date of the next annual general meeting of the company provided that the total number of directors shall not exceed the maximum strength fixed for the Board by the Articles, if any.
78. Consent to act as directors
Every person, other than a director retiring by rotation, who has left at the office of the company a notice signifying his candidature for the office of the director or proposed as a candidate for the office of the director, shall sign and file his consent in writing to act as a director with the Registrar in the form set out in Schedule II within thirty days from the date of his appointment.
79. Certain persons not to be appointed as directors
No company shall appoint or continue the appointment of any person as Chief Executive Officers or director who -
(a) is an undischarged insolvent or has at any time been declared insolvent by court;
(b) is, or has been convicted by a court of a criminal offence whether or not involving moral turpitude;
(c) is of unsound mind declared by a court;
(d) has not paid any call in respect of shares of the company held by him;
(e) is a director in more than five companies.
80. Resignation by a director
A director may resign from his office by giving notice in writing to the Company and such resignation shall be effective from the date of receipt thereof. Provided that resignation by a Chief Executive Officer or a salaried working director shall be effective from the date of its acceptance by the Board.
81. Removal of Directors
(1) A company may, by ordinary resolution, remove a director before the expiry of period of his office.
(2) A notice signed by a shareholder at least fifteen days before the general meeting shall be required for proposing any resolution to remove a director under this section along with the reasons or grounds for such removal.
(3) On receipt of notice under sub-section (2), the company shall forthwith send a copy of the proposed resolution to the director concerned who shall be heard on the resolution at the meeting.
82. Board meetings
(1) Every company shall hold a meeting of its Board of directors at least once in every three months and at least four such meetings shall be held in every year.
(2) Notice of every meeting of the Board shall be given in writing to every director along with the business to be transacted thereat.
(3) The quorum for a meeting of a Board shall be one-third of its total strength or two directors whichever is higher and in case the quorum is not present, the meeting shall stand adjourned to the same day and time and place in the next week.
(4) The decisions at the Board meetings shall be taken by majority of directors voting in favour of any resolution. Provided that in case of equality of votes, the Chairman of the Board of directors shall have a casting or second vote.
83. General Powers of the Board
(1) Subject to the provisions of this Act, the Board of directors of a company shall be entitled to exercise all such powers, and to do all such acts and things, as the company is authorised to exercise and do. Provided that the Board shall not exercise any power or do any act or thing which is directed or required, whether by this Act or by the Articles of the company or otherwise, to be exercised or done by the company in general meeting.
(2) The Board of directors of a company shall exercise the following powers only by means of resolutions passed at meetings of the Board
(a) the power to make calls on shareholders in respect of money unpaid on their shares ;
(b) the power to issue debentures ;
(c) the power to borrow money otherwise than on debentures ;
(d) the power to invest the funds of the company ; and
(e) the power to make loans.
(3) The Board may, by a resolution passed at a meeting, delegate its powers to committee of directors, the Chief Executive Officer or any principal officer of the company.
84. Restriction on powers of Board
The Board of directors of a public company shall not, except with the consent of such company in general meeting, -
(a) sell, lease or otherwise dispose of the whole, or substantially the whole, of the undertaking of the company;
(b) remit or give time for the repayment of any debt due by a director to the company;
(c) borrow moneys where the moneys to be borrowed, together with the moneys already borrowed by the company, will exceed the aggregate of the paid up share capital and free reserves of the company, that is to say, reserves not set apart for any specific purpose.
85. Appointment of Chief Executive Officer
Every company shall appoint a Chief Executive Officer for a term not exceeding five years at a time with the approval of the company in general meeting. Provided that a person appointed as Chief Executive Officer of a public company shall not be the Chief Executive Officer of another company.
86. Appointment of selling or buying agents
No company shall appoint a selling or buying agent, who is not a citizen of Bhutan or any foreign company or party, except with the previous approval of the Government on payment of fee prescribed in Schedule IV.
87. No loans to directors etc.
No public company shall, directly or indirectly, make any loan to, or give any guarantee or provide any security in connection with a loan made by any other person to, or to any other person by, -
(a) any director of the lending company;
(b) any partnership firm in which any such director or his relative is a partner;
(c) any body corporate at a general meeting of which not less than twenty five per cent of the total voting power may be exercised or controlled by any such director, or by two or more such directors.
88. Inter-corporate loans and investments
No public company, not being a holding company, shall -
(a) make any loan to any body corporate ;
(b) give any guarantee, or provide any security, in connection with a loan made by any other person to, or to any other person by, any body corporate ;
(c) acquire, by way of subscription, purchase or otherwise the shares or convertible debentures, whether fully or partly, of any other body corporate, exceeding thirty per cent of its paid up share capital and free reserves, which ever is more, unless previously approved by the Ministry on payment of fee prescribed in Schedule IV.
89. Contracts in which directors are interested
(1) Except with the consent of the Board of directors of a company, a director of the company or his relative, a partnership firm in which such a director or his relative is a partner, any other partner in such a firm, or a private company of which the director is a shareholder or director shall not enter into any contract with the company for the sale, purchase or supply of any goods, materials or services.
(2) Every director of a company who is in any way, directly or indirectly, concerned or interested in a contract or arrangement, shall disclose the nature of his concern or interest at a meeting of the Board of directors.
(3) No director of a company, other than a private company, shall take part in the discussion or vote on any contract or arrangement entered into by the company in which he is concerned or interested; nor shall his presence count for the purpose of forming a quorum at the time of any such discussion or vote, and if he does not, his vote shall be void.
90. Companies to have secretaries
Every listed company and every other company having a paid-up share capital of over Nu. 100,000,000 shall appoint a secretary having such qualifications and experience, as may be prescribed by the Ministry, to ensure compliance of the provisions of this Act.
91. Standard of care required of directors
Every director of a company, in the exercise of his powers and discharge of his duties under the provisions of this Act or under the Articles, shall act honestly and in good faith in the best interests of the company and shall exercise the care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances.
PART VIII
COMPROMISES, ARRANGEMENTS, RECONSTRUCTIONS AND AMALGAMATIONS
92. Power to compromise or make arrangements with creditors and members
(1) Where a compromise or arrangement is proposed -
(a) between a company and its creditors or any class of them; or
(b) between a company and its members or any class of them; the court may, on the application of the company or of any creditor or member of the company, order a meeting of the creditors or class of creditors, or of the members or class of members, as the case may be, to be held and conducted in such manner as the court directs.
(2) If a majority in number representing three-fourths in value of the creditors, or class of creditors, or members, or class of members as the case may be, present and voting at the meeting, agree to any compromise or arrangement, the compromise or arrangement shall, if sanctioned by the court, be binding on all the creditors and members and also the company.
(3) An order made by the court under sub-section (2) shall have no effect until a certified copy of the order has been filed with the Registrar.
93. Information as to compromises or arrangements
(1) Where a meeting of creditors or of members is called under section 92 -
(a) with every notice given not less than twenty one clear days before the date fixed for calling the meeting which is sent to a creditor or member, there shall also be sent the scheme of compromise or arrangement; and
(b) the chairman of the meetings appointed by the Court shall submit his report to the Court after the meetings within fourteen days from the date of convening the meetings.
94. Provision for facilitating construction and amalgamation of companies
(1) Where an application is made to the court under section 92 for the sanctioning of a compromise or arrangement and it is shown to the court :
(a) that the compromise or arrangement has been proposed for the purposes of, or in connection with, a scheme for the reconstruction of any company or companies or the amalgamation of any two or more companies; and
(b) that under the scheme the whole or any part of the undertaking, property or liabilities of any com pany in the schem e (referred to as a transferor com pany) is to be transferred to another com pany (referred to as transferee com pany); the Court may by order make provision for all or any of the following matters :-
(i) the transfer to the transferee company of the properties, assets or liabilities of the transferor company;
(ii) the allotment or appropriation by the transferee company of any shares which, under the scheme, are to be allotted or appropriated by that company to or any person;
(iii) the continuation by or against the transferee company of any legal proceedings pending by or against any transferor company;
(iv) the dissolution, without winding up, of any transferor company;
(v) the provision to be made person, who dissent from the compromise or arrangement; and
(vi) such incidental, consequential and supplemental matters as are necessary to secure that the reconstruction or amalgamation shall be fully and effectively carried out.
(2) Within thirty days after the making of an order under this section, every company in relation to which the order is made shall cause a certified copy thereof to be filed with the Registrar for registration.
95. Notice to the Registrar of application under sections 92 & 94
The court shall give notice of every application made to it under section 92 or 94 to the Registrar, and shall take into consideration the representation, if any, made to it by the Registrar before passing any order.
96. Power of Government to provide for amalgamation of Government companies in public interest
(1) Where the Government is satisfied that it is essential in the public interest that two or more Government companies should amalgamate, then notwithstanding anything contained in section 94, the Government may, by order, provide for the amalgamation of those companies into a single company.
(2) The order aforesaid may provide for matters specified in sub-section (1) of section 94 which in the opinion of the Government be necessary to give effect to the amalgamation.
(3) Within thirty days after the making of an order under this section, every company in relation to which the order is made shall cause a certified copy thereof to be filed with the Registrar for registration.
PART IX
STATUTORY RECORD AND INSPECTION
97. Statutory record and inspection
Every company shall keep at its registered office the following registers, besides the register of shareholders and debenture holders under and enter therein the relevant particulars within seven days of the happening of the event concerned -
(a) Register of buy-back of shares with particulars as to -
(i) securities bought under section 29;
(ii) the consideration paid for the securities bought back;
(iii) the date of buy back;
(iv) re-issue of securities, if any, with particulars thereof and the date of re-issue.
(b) Register of transfers with particulars as to -
(i) Name of the transferor;
(ii) Name of the transferee;
(iii) date of transfer approved by the Board of committee thereof; and
(iv) date of delivery of certificate as to share or debenture to the transferee;
(c)Register of charges with particulars as to -
(i) short description of the property charges;
(ii) the amount of the charge;
(iii) the names of persons entitled to the charge;
(iv) modification of charge, if any,
(v) the date of full satisfaction of the charge.
(d) Register of inter-corporate loans etc. with particulars as to -
(i) the name of the body corporate to which loan made;
(ii) the amount of the loan;
(iii) the date on which the loan has been made;
(iv) the date on which the guarantee has been given or security has been provided in connection with a loan made by any other person to, or to any other person by, any body corporate.
(e) Register of inter-corporate investments with particulars as to -
(i) the name of the body corporate in which the investment has been made;
(ii) the date on which the investment has been made;
(iii) amount of investment and the particulars of securities in which investment has been made.
(f) Register of contracts in which directors are interested with particulars as to -
(i) the date of the contract or arrangement;
(ii) the names of the parties thereto;
(iii) the principal terms and conditions thereof;
(iv) the date on which the contract or arrangement covered by section 89 was placed before the Board meeting;
(v) the names of directors voting for and against the contract or arrangement and the names of those remaining neutral.
(g) Register of directors etc. with particulars as to -
(i) the nam e, his father`s nam e or w here the individual is a m arried w om an, the husband`s nam e,fullresidentialaddress and the nationality;
(ii) the date of appointment;
(iii) the date of cessation.
(h) R egister of directors` share-holding with particulars as to -
(i) Name of the director;
(ii) the number, description and amount of shares in, or debentures of, the com pany or any other body corporate, being the com pany`s subsidiary or holding company.
98. Inspection of statutory registers etc.
(1) The statutory registers, register of shareholders and debenture holders and minutes of general meetings maintained by a company under this Act shall be open for inspection, during business hours, to the shareholders and debenture holders free of charge or to any member of the public on payment of such sum as prescribed in Schedule IV.
(2) Any person shall be entitled to be furnished, within seven days after he has made a request in that behalf to the company, with a certified copy of the documents referred to in sub-section (1) on payment of such sum as prescribed in Schedule IV.
(3) If any inspection required under sub-section (1) is refused, or if any copy required under sub-section (2) is not furnished within the time specified therein, the Government may, by order, compel an immediate inspection or direct that the copy required shall forthwith be sent to the person requiring it and in default, the company and its Chief Executive Officer shall be punishable with fine which may extend Nu.5,000 in respect of each offence.
PART X
WINDING UP VOLUNTARY WINDING UP
99. Circumstances in which company may be wound-up voluntarily
(1) A company may be wound-up voluntarily -
(a) when the period, if any, fixed for the duration of the company by the articles has expired, or the event, if any, has occurred, on the occurrence of which the articles provide that the company is to be dissolved, and the company in general meeting passes a resolution requiring the company to be wound-up voluntarily;
(b) if the company passes a special resolution that the company be wound-up voluntarily.
(2) When a company has passed a resolution for voluntary winding up, it shall, within fourteen days of the passing of the resolution, give notice of the resolution by advertisement in the newspaper circulating in the district where the registered office of the company is situated.
(3) A voluntary winding up shall be deemed to commence at the time when the resolution for voluntary winding up is passed and from that date the company shall, cease to carry on its business, except so far as may be required for the beneficial winding up of such business : Provided that the corporate state and corporate powers of the company shall continue until it is dissolved.
100. Appointment of liquidator
(1) The company in general meeting shall -
(a) appoint one or more liquidators for the purpose of winding up the affairs and distributing the assets of the company; and
(b) fix the remuneration, if any, to be paid to the liquidator or liquidators.
(2) On the appointment of a liquidator, all the powers of the Board of directors and of the Management shall cease.
(3) If a vacancy occurs by death, resignation or otherwise in the office of any liquidator appointed by the company, the company in general meeting may, subject to any arrangement with its creditors, fill the vacancy.
(4) The company shall give notice to the Registrar of the appointment of a liquidator or liquidators made by it and of every vacancy occurring in the office of liquidator, and of the name of the liquidator or liquidators appointed to fill every such vacancy.
101. Powers of liquidator The liquidator shall have power:
(a) to institute or defend any suit, prosecution, or other legal proceeding, civil or criminal, in the name and on behalf of the company;
(b) to carry on the business of the company so far as may be necessary for the beneficial winding up of the company;
(c) to sell the immovable and movable property and actionable claims of the company by public auction or private contract, with power to transfer the whole thereof to any person or body corporate, or to sell the same in parcels;
(d) to raise on the security of the assets of the company any money required;
(e) to do all such other things as may be necessary for winding up the affairs of the company and distributing its assets.
(f) to do all acts and to execute, in the name and on behalf of the company, all deeds, receipts, and other documents, and for that purpose to use, when necessary, the com pany`s seal;
(g) to inspect the records and returns of the company on the files of the Registrar without payment of any fee;
(h) to prove, rank and claim in the insolvency of any contributory, for any balance against his estate, and to receive dividends in the insolvency, in respect of that balance, as a separate debt due from the insolvent, and rateably with the other separate creditors;
(i) to draw, accept, make and endorse any bill of exchange or promissory note in the name and on behalf of the company, with the same effect with respect to the liability of the company as if the bill or note had been drawn, accepted, made or endorsed by or on behalf of the company in the course of its business;
102. Power of court to assess damages against delinquent directors, etc.
If in due course of winding up a company, it appears that any person who has taken part in the promotion or formation of the company, or any past or present director, manager, liquidator or officer of the company
(a) has misapplied, or retained, or become liable or accountable for, any money or property of the company; or
(b) has been guilty of any misfeasance or breach of trust in relation to the company; the court may, on the application of the liquidator, or of any creditor or member, made in that behalf, examine into the conduct of the person, director, or officer aforesaid, and compel him to repay or restore the money or property or any part thereof, respectively, with interest at such rate as the court thinks just, or to contribute such sum to the assets of the company by way of compensation in respect of the misapplication, retainer, misfeasance or breach of trust, as the court thinks just.
103. Duty of liquidator to call general meeting at the end of each year
In the event of the winding up continuing for more than one year, the liquidator shall
(a) call a general meeting of the company at the end of the first year from the commencement of the winding up, and at the end of each succeeding year, or as soon thereafter as may be convenient within three months from the end of the year or such longer period as the Government may allow; and
(b) lay before the meeting an account of his acts and dealings and of the conduct of the winding up during the preceding year, together with a statement of receipts and expenses duly audited, and position of, the liquidation.
104. Final meeting and dissolution
(1) As soon as the affairs of the company are fully wound-up, the liquidator shall:
(a) make up an account of the winding up, showing how the winding up has been conducted and the property of the company has been disposed of; and
(b) call a general meeting of the company for the purpose of laying the audited accounts before it, and giving any explanation thereof.
(2) The meeting shall be called by notice to the members specifying the time, place and object of the meeting, along with copy of audited accounts.
(3) Within one week after the meeting, the liquidator shall send to the Registrar a copy of the accounts.
WINDING UP BY COURT
105. Circumstances in which company may be wound up by court
(1) A Company may be wound up by the court if
a) the company has by special resolution resolved that the company be wound up by the court;
b) the company does not commence its business within a year from the date of its incorporation or suspends its business for a whole year;
c) the number of its shareholders is reduced below 2;
d) the company is unable to pay its debts;
e) the court is of the opinion that it is just and equitable that the company be wound up.
(2) Where a petition for winding up is founded on Section 105 (1) d), a company shall be deemed to be unable to pay its debts if it commits an act of bankruptcy as defined in Section 10. (1) (6) of the Bankruptcy Act of the Kingdom of Bhutan, 1999, and the winding up of the company shall be governed by the provisions of that act.
106. Application for winding up An application to the court for winding up shall be by petition presented either by
(i) the company; or
(ii) the directors; or
(iii) any creditor or creditors; or
(iv) the Registrar of Companies;
(v) the administrative Ministry; or by all or any of them together or separately.
107. Advertisement of petition
Unless the court otherwise directs, every petition for winding up shall be advertised in a national newspaper for not less than 7 clear days (excluding Saturdays, Sundays and public holidays) after it has been served on the company and not less than 7 clear days before the day fixed for the hearing.
108. Commencement of winding up by court
(1) Winding up of a company by the court is deemed to commence at the time of the presentation of the petition for winding up.
(2) If , before the presentation of a petition for winding up by the court, a resolution for voluntary winding up has been passed by a company, the winding up of the company shall be deemed to have commenced at the time of the passing of the resolution, and, unless the court, on proof of fraud or mistake, directs otherwise, all proceedings in the voluntary winding up shall be deemed to be valid.
109. No disposition of property, etc.
After commencement of winding up by the court and before a winding-up order is made, any disposition of the com pany`s property, any transfer of shares, and any alteration in the status of the com pany`s shareholders shall,unless the courtorders otherwise, be void.
110. Restraint of suit or proceeding against company
After commencement of winding up and before a winding-up order is made, the court may, on the application of any of the parties mentioned in section 106, stay any suit or proceeding against the company.
111. Avoidance of attachments, etc
Where a company is being wound up by court, any attachment or execution put in force against the com pany`s property after the com m encem entof the w inding up is void.
112. Hearing of petition for winding up and powers of court
(1) On hearing a winding-up petition, the court may
(a) dismiss the petition with or without costs ; or
(b) adjourn the hearing conditionally or unconditionally ; or
(c) make any interim order that it thinks fit ; or
(d) make any other order that it thinks fit ; or
(e) make an order for winding up with or without costs.
(2) Where the petition for winding up is presented on the ground that it is just and equitable that the company should be wound up, the court may refuse to make an order of winding up if the court is of the opinion that some other remedy is available to the petitioners and that they are acting unreasonably in seeking to have the company wound up instead of pursuing that other remedy.
113. Order for winding up to be communicated
Where the court makes an order for winding up, the court shall forthwith cause intimation thereof to be sent to the Registrar of Companies and the Liquidator.
114. Order for winding up to be filed
On the making of a winding-up order, it shall be the duty of the petitioner and the company to file a certified copy of the order with the Registrar of Companies within 15 working days of the date of the order.
115. Appointment of liquidator
Where a winding up order is made by the court, a liquidator shall be appointed by the court at the time when the order is made.
116. Appointment of provisional liquidator and his powers
(1) At any time after the presentation of a petition for winding up and before the making of a winding-up order, the court may appoint a liquidator provisionally.
(2) Where a provisional liquidator is appointed by the court, the court may restrict his powers by the order appointing him or by a subsequent order ; otherwise he shall have the same powers as a liquidator.
(3) A provisional liquidator shall cease to hold office when a liquidator is appointed by the court on a winding-up order being made. 117.C ustody of com pany's property In a winding up, if and so long as there is no provisional liquidator or liquidator appointed all the property of the company is deemed to be in the custody of the court.
118. Powers of liquidator
(1) The liquidator in a winding up by the court shall have the power, with the sanction of the court -
(a) to institute or defend any suit, prosecution, or other legal proceeding, civil or criminal, in the name and on behalf of the company;
(b) to carry on the business of the company so far as may be necessary for the beneficial winding up of the company;
(c) to sell the immovable and movable property and actionable claims of the company by public auction or private contract, with power to transfer the whole thereof to any person or body corporate, or to sell the same in parcels;
(d) to raise on the security of the assets of the company any money requisite;
(e) to do all such other things as may be necessary for winding up the affairs of the company and distributing its assets.
(2) The liquidator in a winding up by the court shall have power -
(a) to do all acts and to execute, in the name and on behalf of the company, all deeds, receipts, and other documents, and for that purpose to use, when necessary,the com pany`s seal;
(b) to inspect the records and returns of the company on the files of the Registrar without payment of any fee;
(c) to prove, rank and claim in the insolvency of any contributory, for any balance against his estate, and to receive dividends in the insolvency, in respect of that balance, as a separate debt due from the insolvent, and rateably with the other separate creditors; and
(d) to draw, accept, make and endorse any bill of exchange or promissory note in the name and on behalf of the company, with the same effect with respect to the liability of the company as if the bill or note had been drawn, accepted, made or endorsed by or on behalf of the company in the course of