Academic journal article Journal of Political Studies

Political Economy, Concept and Rationale of Winding-Up of Companies and Corporate Sector

Academic journal article Journal of Political Studies

Political Economy, Concept and Rationale of Winding-Up of Companies and Corporate Sector

Article excerpt

Concept of Political Economy

Political economy is simply interaction between politics, law and economics and the same examines how the specific public policy is formulated and implemented through a legal frame work. Since certain groups and companies are competing for limited resources by following the certain rules and regulations as in case of winding up of companies. The law and practice of winding of the companies is being carried out on the similar analogy of political economy for best and efficient use of economic resources for public good and welfare. (

Historically the concept of political economy has been linked to Plato and Aristotle based on natural law. In 1990s and in the beginning of 21st century a number of economically and politically motivated multinational corporations were accused of exploitation of economic resources of developing countries by relaxing worker protection and environmental laws by using of international and local political influence which ultimately affect the local economy of developing countries ( political-economy).

Concept of Winding-up

Winding up of a company is a legal procedure to dissolve the company and put an end to its life. The company ceases to be a going concern (Winding up of Company).This procedure is also known as "liquidation proceedings". Therefore, winding up is a legal process, through which an incorporated company is brought to an end (Pakistan Industrial Leasing Corporation Vs Sunrise Textile Mills, 2009).

Need for Winding-up of Companies and Political Economy

The fiscal, economic and financial and political system's strength and stability depends upon an effective and speedy winding up process. It is, therefore, essential to make an effective and sound economic and political structure for restructuring and rehabilitation of such companies alongwith frame work of winding up/ liquidation. The structure and frame work must look into and search for to protect estate and make best use of the value of assets/ properties, accept inter se rights of creditors and give balanced treatment of similar creditors at the same time dealing with small creditors just and equitably.

The Process and Rationale of Winding of Companies

The process of winding up starts with a resolution passed for voluntary winding up by the members of the company or after the court passes the order for winding up ( The term winding up is used for a process by which a company is dissolved. In case the excess if any is available must be dispersed to the members and contributories proportionately as per their shares (Pakistan Industrial Leasing Corporation Vs Sunrise Textile Mills, 2009) By the dissolution, the company's legal entity and personality brings to an end. The insolvency of a company, that is, incapable/ unable of paying its debts and liabilities is the one of the important reasons of winding up/ liquidation. However, a company can also be wound up even as it is quite solvent (Simon Goulding, 1999:389).

Liquidation or winding up is the process through which the properties and assets of the company under winding up ae realized, its dues are paid and any surplus is obtained back by members. This process is the steer up to the company's decease after its formal dissolution (Jennifer James, 2003-4:265). On winding up, the company is necessarily to be closed to be a going entity. The owners are also legally competent to get the share of residual assets and may ask for to pay off in the event if the assets are insufficient and the present agreement so necessitates (Winding Up- Procedure under Companies Act, 1956)

The prime purpose and rationale behind the introduction of the Companies Ordinance, 1984, was the commencement and completion of an effective winding up of the companies with in a possible shortest time period. From the plain reading of the preamble of the Companies Ordinance, 1984, it is obvious that the purpose and rationale behind the introduction of the companies Ordinance is certainly that the law relating to the companies and other specific associations was required to be ammended and consolidated suitably for the better and healthy growth of corporate sector, promotion of policies of capital investment, development of the economy, better protection of the investors, creditors and members, stability and strengthing of the regulators and other relevant matters connected with the process of winding up of the companies. …

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