Companies Act (No. 17 of 1982)

Sri Lanka Consolidated Acts

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Companies Act (No. 17 of 1982) - Sect 347

Preferential payments

347.

(1) In a winding up there shall be paid in priority to all other debts-

	(a) income tax charged or chargeable for one complete year prior to the relevant date, such year to be selected by the Commissioner-General of Inland Revenue in accordance with the provisions of the Inland Revenue Act, No. 28 of 1979 ;

	(b) business turnover tax charged or chargeable for one complete year prior to the relevant date, such year to be selected by the Commissioner-General of Inland Revenue in accordance with the provisions of the Finance Act, No. 11 of 1963 ;

	(c) all rates, or taxes (other than income tax) due from the company at the relevant date, and having become due and payable within the twelve months immediately prior to that date ;

	(d) all dues to the Government of Sri Lanka as recurring payments for any services given or rendered periodically;

	(e) all provident fund dues, gratuity payments, and industrial court awards payable to any employee or workman ;

	(f) all wages or salary (whether or not earned wholly or in part by way of commission) of any clerk or servant in respect of services rendered to the company during the four months immediately prior to the relevant date and all wages (whether payable for time of work or for piece work) of any workman or labourer in respect of services so rendered;

	(g) all accrued holiday remuneration becoming payable to any clerk, servant, workman or labourer (or in the case of his death to any other person in his right) on the termination of his employment before or by the effect of the winding up order or resolutions

(h) unless the company is being wound up voluntary merely for the purposes of reconstruction or amalgamation with another company, or unless the company has at the commencement of the winding up, under such a contract with insurers as is referred to in section 24 of the Workmen's Compensation Ordinance rights capable of being transferred to and vested in the workman, all amounts due in respect of any compensation or liability for compensation under such Ordinance, being amounts which have accrued before the relevant date.

(2) Notwithstanding anything in paragraph (c) of subsection (1), the sum to which priority is given under the provisions of that paragraph shall not in the case of any one claimant, exceed two thousand rupees :

(3) Where any compensation under the Workmen's Compensation Ordinance is a fortnightly payment, the amount due in respect thereof shall for the purposes of paragraph (e) of subsection (1) be taken to be the amount of the lump sum for which such payment may be commuted under that Ordinance.

(4) Where any payment has been made

	(a) to any clerk, servant, workman or labourer in the employment of the company, on account of wages or salary ; or

	(b) to any such clerk, servant, workman or labourer or, in the case of his death, to any other person in his right, on account of accrued holiday remuneration,

(5) The debts referred to in the preceding provisions of this section shall

	(a) rank equally among themselves and be paid in full, unless the assets are insufficient to meet them, in which case they shall abate in equal proportions; and

	(b) so far as the assets of the company available for payment of general creditors are insufficient to meet them, have priority over the claims of holders of debentures under any floating charge created by the company, and be paid accordingly out of any property comprised in, or subject to, that charge.

(6) Subject to the retention of such sums as may be necessary for the coats and expenses of the winding up, the debts referred to in subsection (1) shall be discharged forthwith so far as the assets are sufficient to meet them.

(7) In the event of a landlord or any other person distaining or having distained on any goods or effects of the company within three months immediately prior to the date of a winding-up order, the debts to which priority is given by the provisions of this section shall be a first charge on the goods or effects so distained on or the proceeds of the sale thereof:

(8) For the purposes of this section

	(a) any remuneration in respect of a period of holiday or of absence from work through sickness or other reasonable cause shall be deemed to be wages in respect of services rendered to the company during that period;

(b) the expression ''accrued holiday remuneration", includes, in relation to any person, all sums which, by virtue either of his contract of employment or of any enactment (including any order made or direction given under any written law), are payable on account of the remuneration which would, in the ordinary course, have become payable to him in respect of a period of holiday, had his employment with the company continued until he became entitled to be allowed the holiday;

(i) in the case of a company ordered to be wound up compulsory, the date of the appointment (or of first appointment) of a provisional liquidator, or, where no such appointment was made, the date of the winding-up order. unless in either case the company had commenced to be wound up voluntarily before that date; and

(ii) in any case where the provisions of sub-paragraph (i) do not apply, the date of the passing of the resolution for the winding up of the company ; and

	(d) the expression " rates " or " taxes " means any rate, charge, tax, or assessment imposed or made by the Government or by any Development Council, Municipal Council, Urban Council, Town Council, Village Council, or other Authority established under the provisions of any written law for the time being in force in that behalf.

(9) The provisions of subsection (1) shall not apply in the case of a winding up where the relevant date as defined in subsection (7) of section 253 of the Companies Ordinance occurred before the appointed date and in such a case the provisions relating to preferential payments which would have applied if this Act had not been brought into operation shall be deemed to remain in force.

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