Status as on- 16/10/2021
With the increase in globalisation, the problem in reference to the corporate insolvency have been boosted up as when compared to the earlier times. The Insolvency and Bankruptcy Law (IBC), 2016 not only allows for bankruptcy proceedings, but the law also sets out rules for solvent companies that want to dissolve/wind-up their business. The position of a solvent company must be that it can pay off its debts to qualify for voluntary liquidation.
Section 59 of the Code deals with the voluntary liquidation of corporate persons.
Voluntary liquidation refers to the liquidation of the company in accordance with the wishes of all its members. It is referred as a private settlement procedure with minimum judicial intervention.
The rules/procedures that must be followed before the initiation of voluntary liquidation are:
- Declaration of solvency;
- Approval of the members;
- Approval of the creditors;
- Informing the Registrar of Companies and the Insolvency and Bankruptcy Board of India.
The process of voluntary liquidation begins after receiving the required approval, and also begins on the day that members pass a special resolution and are approved by creditors. The impact of liquidation includes the legal entity’s termination of commercial activities from the date of liquidation, and will only be used for the beneficial liquidation of activities.
Procedure before Hon’ble NCLT-
- Appointment of liquidator: The liquidator declares that the company is solvent, only qualified bankruptcy professionals can be appointed as
- Liquidator’s announcement: The liquidator shall make an public announcement within 5 days from the date of order.
- Creditors submit proof of creditor’s rights: All persons who claim to be interested parties of a corporate person must submit and prove their creditor’s rights.
- Verification of creditor rights: After receiving creditor rights, the liquidator must verify creditor rights received within 30 days from the last date the creditor is expected to file creditor rights.
- Preparation of the list of interested parties: After verifying, the liquidator prepares a list based on the claims. The checklist must be prepared within 45 days from the last date the claim was received.
- Realization of Corporate person assets: The liquidator himself or with the help registered valuers will confirm the value of the assets in accordance with the prescribed method agreed.
- Opening of personal bank accounts of legal entities: The liquidator needs to open a separate bank account at the bank, to recover all money owed to the corporate entity. Shall also be included in the voluntary settlement.
- Distribution of the realized income: The liquidator will distribute the income from the realization of the assets of the legal entities to all interested parties within 6 months from the date of receipt of payment.
- Preparation of the final report: The liquidator must draw up the final report of the liquidation process, including the audited accounts and the liquidation reports. After the liquidator has prepared the report, it must be sent to the concerned Authorities, including the NCLT and the IBBI.Top of Form
- Corporate person dissolution application: The liquidator must submit a request for the dissolution of the company to the corresponding granting agency for the realization and distribution of its assets among the interested
The emerge of new regulations by the government is beneficial because they carry out voluntary liquidation procedures with specified deadlines. IBBI changed the liquidation procedure to be of a fixed duration. The new rules require the process to be completed within one year of its inception.
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