The Provisions of voluntary winding up have been removed from the Companies Act, 2013 and are now governed by the IBC, 2016. Ministry of Corporate Affairs vide notification dated 30th March, 2017 notified Section 59 of the Insolvency and Bankruptcy Code, 2016 which is relating to Voluntary Liquidation of Corporate persons. On the very next day, the Insolvency and Bankruptcy Board of India (IBBI) vide its notification dated 31st March 2017, notified the Insolvency and Bankruptcy Board of India (Voluntary Liquidation Process) Regulations, 2017 which will come into effect from 1st April 2017.
Who may apply for voluntary liquidation?
A corporate person who intends to liquidate itself voluntarily which has not committed any default may initiate voluntary liquidation proceedings under the provisions of this Chapter. [Section 59(1)] So, Any Company or LLP which has not defaulted in payment and have a full capacity to repay debt can apply for voluntary liquidation.
> Declaration of Solvency
A declaration from majority of the directors of the company verified by an affidavit stating that:
The above declaration shall be accompanied with the following documents:
> Members Approval
A special resolution of the members of the company in a general meeting requiring the company to be liquidated voluntarily and appointing an insolvency professional to act as the liquidator must be passed within 4 weeks of declaration of solvency;
> Creditors Approval
If the company owes any debt to any person, Creditors representing two thirds in value of the debt of the company shall approve the resolution passed for voluntary liquidation within seven days of such resolution.
> Intimation to ROC and IBBI
The company shall notify the ROC and the IBBI about the resolution passed to liquidate the company within 7 days of such resolution or the subsequent approval by the creditors, as the case may be. [Section 59(4)]
> Voluntary Liquidation Commencement Date
The voluntary liquidation proceedings in respect of a company shall be deemed to have commenced from the date of passing of the special resolution, subject to the approval of the creditors. [Section 59(5)]
Voluntary Liquidation Process
> Public Announcement
Liquidator shall make public announcement within 5 working days of his appointment to submit claims within 30 days. It must be published in one english daily and one regional daily newspapers wherein registered office of the corporate person is situated. It must also be posted in the website of corporate persons, if having. It must be sent to the IBBI via e-mail email@example.com for posting it in board’s website.
Public Announcement must contain the following:
> Opening of Bank Account
A new bank account with scheduled bank must be opened with the word ‘In Liquidation’ at last after the name of corporate person for receiving and paying settlement amount. Each and every financial transaction must be settled through these account.
> Claims Collection, Segregation, Acceptance And Rejections
Claim by Operational Creditors
Operational Creditor other than workman or employee shall submit proof of claim to the liquidator in person, by post or electronic means in Form B of schedule 1 of Voluntary Liquidation Process Regulation.
Claim by Financial Creditors
A person claiming to be a financial creditor of the corporate person shall submit proof of claim to the liquidator in electronic means in Form C of Schedule I.
Claim by Workmen and Employees
A person claiming to be a workman or an employee of the corporate person shall submit proof of claim to the liquidator in person, by post or by electronic means in Form D of Schedule I. Where there are dues to numerous workmen or employees of the corporate person, an authorized representative may submit one proof of claim for all such dues on their behalf in Form E of Schedule I.
Claim by Other Stakeholders
A person, claiming to be a stakeholder other than those above, shall submit proof of claim to the liquidator in person, by post or by electronic means in Form F of Schedule I.
Formats Prescribed in Schedule 1 of IBBI (Voluntary Liquidation Process) Regulations, 2017
|Form A||Public Announcement|
|Form B||Proof of claim by Operational creditors except by workmen & employees|
|Form C||Proof of claim by financial creditors|
|Form D||Proof of claim by workmen & employees|
|Form E||Proof of claim by authorized representative of workmen & employees|
|Form F||Proof of claim by any other stakeholder|
Process flowchart of Voluntary Liquidation
Convening Board Meeting
Filing of Declaration of Solvency
Filing of ‘Declaration of Solvency’ with ROC in form e-GNL-2 verified by an Affidavit signed by majority of Directors alongwith following attachments:
(i) Latest 2 years audited financial statements;
(ii) Valuation Report, if any, prepared by Registered Valuer;
Sending Notice of EGM to all Shareholders
Convening EGM within 4 weeks of filing Declaration of Solvency
Approval from Creditors’ representing 2/3rd value of debt is required either by way of holding meeting or NOC from each creditors.
P.A must be made within 5 working days from the date of appointment of Insolvency Professional.
Intimation to IBBI and ROC
Within 7 days of public announcement, Intimation must be sent to IBBI and ROC.
Opening of ‘In Liquidation’ Bank Account
A new bank account with scheduled bank must be opened with the word ‘ABC Private Limited-In Liquidation’ for receiving and paying settlement amount.
Collection and Verification of Claims
All claims must be made within 30 days of public announcement. Liquidator must verify the correctness of each claim and prepare a list of stakeholders.
Preparation of Preliminary Report
Based on claims received, liquidator needs to prepare Preliminary Report within 45 days from the date liquidation commencement date containing capital structure, assets and liabilities, claims received etc.
Distribution of Proceedings
Liquidator needs to sell all the assets by auction or through direct party, realize amount from creditor and distribute proceedings among all the stakeholders.
Submission of Final Report
Liquidator must prepare a final report containing liquidation proceedings and submit it to the ROC, IBBI and NCLT. Based on final report and application for dissolution, NCLT pass an order for dissolution of corporate entity.
Filing of order with ROC
Copy of order received from NCLT needs to be filled with ROC in e-form INC-28 for dissolution of a corporate entity.
Role of Adjudicating Authority i.e NCLT in whole Process
The Adjudicating Authority i.e NCLT is competent to declare the corporate person as dissolved after due liquidation and distribution of its assets. The NCLT comes into the picture only at the final stage of liquidation after application for Dissolution of Corporate Person is made by Liquidator after distribution of Liquidation assets of the Corporate Person by following the procedure stipulated under the Code.
Roles and Responsibilities of Liquidator in whole Process
Liquidator of corporate person is assigned with the following task
Unclaimed Proceeds of Liquidation (Regulation 39)
The liquidator shall apply to the NCLT for an order to transfer into the Companies Liquidation Account to the Public Account of India, any unclaimed proceeds of liquidation or undistributed assets or any other balance payable to the stakeholders on the date of the order of dissolution.
A person claiming to be entitled to any money paid into the Companies Liquidation Account may apply to the Board for an order for payment of the money claimed; which may, if satisfied that such person is entitled to the whole or any part of the money claimed, make an order for the payment to that person of the sum due to him, after taking such security from him as it may think fit.
Any money paid into the Companies Liquidation Account, which remains unclaimed thereafter for a period of fifteen years shall be transferred to the general revenue account of the Central Government.
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