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Section 386 of Insolvency Act CAP 53: Liability of past directors and shareholders

    

(1) In this section, "relevant payment" means a payment made out of capital in respect of the redemption or purchase by a company of any of its own shares.
(2) This section applies if a company is in liquidation and—
(a) it has, under the Companies Act (Cap. 486), made a payment out of capital in respect of the redemption or purchase of any of its own shares; and
(b) the aggregate amount of the company's assets and the amounts paid as a contribution to its assets (apart from under this section) are not sufficient for payment of its debts and liabilities and the expenses of the liquidation.
(3) If the liquidation commenced within twelve months after the date on which the relevant payment was made—
(a) the person from whom the shares were redeemed or purchased; and
(b) the directors who prepared the statement that the company will be able to continue to carry on business as a going concern under the Companies Act (Cap. 486) for purposes of the redemption or purchase, except a director who shows that the director had reasonable grounds for forming the opinion set out in the declaration,
are, to the extent necessary to satisfy the insufficiency, liable to contribute to the company's assets as provided by subsections (4) and (5).
(4) A person from whom any of the shares were redeemed or purchased is liable to contribute an amount not exceeding so much of the relevant payment as was made by the company in respect of the person's shares; and the directors are jointly and severally liable with that person to contribute that amount.
(5) A person who has contributed an amount to the assets in accordance with this section may apply to the Court for an order directing any other person jointly and severally liable in respect of that amount to pay to the person such amount as the Court considers appropriate and equitable.
(6) Section 385 does not apply to a liability accruing under this section.

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Disclaimer: This document is not to be taken as legal advise.

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