Broad construction of company arrangement law allows member-initiated revival schemes in liquidation and preserves member locus.

Section 391 of the Companies Act was construed broadly in liquidation: a member, not only the liquidator, may apply for an arrangement, because the liquidator's right is additional and does not exclude pre-existing rights of members or creditors. Shareholders who had handed over share certificates after capital return remained members where their names continued in the register, so they retained locus to move the summons. A scheme to restart a company in liquidation was held maintainable under section 391 and could be placed before the members for consideration, as the provision extends to arrangements aimed at revival where no subsisting creditors remained.

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Issues: (i) Whether, when a company is in winding-up, an application under section 391 of the Companies Act can be made only by the liquidator or also by a member. (ii) Whether shareholders who had handed over their share certificates after receipt of capital return had ceased to be members and lacked locus to move the application. (iii) Whether a scheme for restarting a company in liquidation is maintainable under section 391 and can be placed before the members for their consideration.

Issue (i): Whether, when a company is in winding-up, an application under section 391 of the Companies Act can be made only by the liquidator or also by a member.

Analysis: Section 391 does not make the liquidator the exclusive applicant in a winding-up. The language gives the liquidator an additional right to apply, without taking away the pre-existing rights of creditors or members. The scheme of the Companies (Court) Rules, including rule 68 requiring service on the liquidator where the applicant is someone else, supports that construction.

Conclusion: The application could be made by a member even though the company was under liquidation, and the liquidator was not the sole person entitled to apply.

Issue (ii): Whether shareholders who had handed over their share certificates after receipt of capital return had ceased to be members and lacked locus to move the application.

Analysis: Membership is determined by agreement to become a member and entry of the name in the register of members. Handing over share certificates for return of capital does not amount to surrender of shares to the company. The register still showed the applicants as members, and section 536(2) indicates that membership status does not automatically cease on winding-up or on return of capital.

Conclusion: The applicants remained members and had locus to maintain the summons.

Issue (iii): Whether a scheme for restarting a company in liquidation is maintainable under section 391 and can be placed before the members for their consideration.

Analysis: Section 391 is wide enough to cover arrangements between a company and its members, including a scheme to take a company out of winding-up and restart it. Since the company had no subsisting creditors, the proposed arrangement concerned the members and the revival of the company, which falls within the statutory language.

Conclusion: The proposed scheme was maintainable under section 391 and could be placed before the members for consideration.

Final Conclusion: The summons for directions was rightly granted, with the meeting of members to be convened so that the proposed revival scheme could be considered in accordance with law.

Ratio Decidendi: Section 391 of the Companies Act is to be construed broadly so that, in a winding-up, a member may apply for an arrangement and a scheme for revival or restarting the company may validly be placed before the members for approval.

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