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A youth forum has been established few months ago and it was registered under the Companies Act. Now the executive body has decided to terminate its registration from Joint Stock Companies and turn into a welfare organization mainly for charitable purpose under Youth and Social Welfare Department. What would be the proper procedure in this regard?
Thank you for your question. In order to advise you on the procedure to be adopted for converting the organisation incorporated under the Companies Act into an organisation incorporated under the Voluntary Social Welfare Agencies (Registration and Control) Ordinance 1961, (a registration by the Youth and Social Welfare Department ("the Department") will be given under this Ordinance) you should consult a lawyer as the procedure is quite cumbersome and would require preparation of number of documents which a person without legal background may not be competent to prepare.
Before your Board of Directors decides to get registration under the Department, you should consult a lawyer and take advice if such a decision would at all be beneficial for the organisation. You should be aware of the regulatory regime and the control over your organisation by the regulatory regime before taking such a decision. Under section 9 of the 1961 Ordinance, the Department has the power and authority to suspend and dissolve the Governing Body of an agency registered under the 1961 Ordinance. On the other hand the Registrar, RJSC has no such authority. You should consider if you would like to such a risk or not.
If you are convinced that you should get a registration with the Department by "terminating" your registration with the Registrar of Joint Stock Companies, then you will have to observe the following procedure:
1. You will have to wind up the charitable company that you have incorporated under section 28 of the Companies Act, 1994. The procedure for winding up a charitable company incorporated under section 28 is similar to that of winding up a company limited by shares unless otherwise stated in the constitution of the charitable company. Since I have not seen the constitution of your organisation, I am unable to advise you on the specific procedure that you should follow. However, as a matter of general procedure prescribed in the Companies Act you will have to take the following steps:
(a) Call a Board Meeting and take a decision for winding up the company with a declaration of solvency as per the provisions of section 290 of the Companies Act;
(b) Call an Extraordinary General Meeting of the Members with an agenda for winding up;
(c) Pass a Special Resolution with the consent of at least 75% of the members of the organisation;
(d) Submit a copy of the Special Resolution within 10 days of passing the same to the Registrar, RJSC;
(e) Publish Notice of Special Resolution in the Official Gazette and in some news papers as per the provisions of section 289 of the Companies Act, 1994;
(f) Appoint a Liquidator for the liquidation of the assets of the charitable company;
(g) Carry out an audit of the charitable company by an Auditor and submit the report to the Liquidator;
(h) the Liquidator is under an obligation to follow the procedure prescribed in the Companies Act in distributing the assets of the charitable company in accordance with the Companies Act.
2. After settling the creditors, if there is any surplus assets, the Liquidator shall transfer the assets to the new organisation.
3. In order to obtain registration under the 1961 Ordinance, you will have to submit an application in the prescribed form under section 4 of the 1961 Ordinance to the Registration Authority accompanied by a copy of the constitution of the agency. The Registration Authority, on receipt of the application, make such enquiries as it considers necessary, and either grant the application, or, for reasons to be recorded in writing, reject it.
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