Section 176(10) Of The Companies Act 1965: Is The Restraining Order Abused?

by ranjan chandran

From Current Law Journal


A company like an individual may require financial assistance to carry on with its day to day business. Towards this end, the company like the individual will seek financial assistance in the form of a loan from a bank or other financial institutions. That loan may be in the form of a secured loan or an unsecured loan.

Having obtained the loan the company may then encounter financial difficulties when it cannot repay the loan. Such a situation will expose the company to a possible court action for the recovery of the amount of the loan or the amount due and payable.

At times such a court action can result in a judgment being entered against the company with an entitlement to the holder of the judgment to execute upon that judgment.

Execution may take many forms and one such mode may be a petition to wind-up the company. In effect winding-up orders result in a company's business activities becoming extinct. It is here that s. 176 of the Companies Act 1965 ('the Act') comes into consideration.

By way of an introduction it is to be appreciated that the sub-heading of s. 176 of the Act reads "Arrangements and Reconstructions".

The primary object of that section is to afford an opportunity to an ailing company which is encountering financial difficulties, and unable to meet the demands of its creditors, an opportunity to come back on its feet, to carry on with its business in the hope of generating income, and to function as a business concern for the interest of its shareholders.