Under the ambit of IBC, Insolvency & Bankruptcy Code 2016, Voluntary Liquidation is a quick, efficient, & timely process which ensures that the assets of the Company does not lose its value and involves speedy realization to the stakeholders.
As per Section 255 with Schedule XI of Insolvency and Bankruptcy Code, 2016 it removes the need for Section 304 to 325 of The Companies Act, 2013.
As a result, the Insolvency and Bankruptcy Board of India (Voluntary Liquidation Process) Regulations, 2017 were notified on 1st April 2017. Finally, Section 59 under Chapter V in IBC covers “Voluntary Liquidation procedures for Corporate Persons”.
This process is available to companies that have not committed any default and want to shut down/ liquidate themselves.
What Is Voluntary Liquidation Under IBC, 2016
The Code describes the three major conditions for a Company which intends to wound-up or liquidate itself voluntarily: –
-The Company has not committed any default.
Declaration from all of Directors verified by an Affidavit that the Company has no debts or will be able to pay its debts in full from the proceeds of assets to be sold in the liquidation process and lastly, That the Company is not being liquidated to defraud any person. Within four weeks of the declaration specified in Point No. b hereinabove, majority of the Directors or Partners, as the case may be, shall pass a special resolution liquidating the Corporate/Company and appoint an Insolvency Professional to act as the Liquidator.
Where the Corporate Person owes any debt to any person, creditors representing two-third (2/3rd) in value of the debts of the Corporate Person shall approve the special resolution passed by the Directors, Partners for liquidation of the Company.
Once the Liquidation is commenced, the Company shall cease to carry on its business, unless required for beneficial winding up of the Corporate Person and the corporate person shall continue until it is dissolved.
Voluntary Liquidation Process & Steps:-
1-Public Announcement by the Liquidation calling claims from creditors of the Corporate Persons
2-Collation, Verification of the claims and thereby preparation of the list of Stakeholders by the Liquidator
3-Liquidator to value and sell the assets of the Corporate Persons
4-Liquidator to realize uncalled capital or unpaid capital contribution from any contributory to Corporate Person
5-Liquidator to open a bank account in the name of Corporate Person followed by “in voluntary liquidation” for receipt of all monies due to the Corporate Person.
6-Liquidator to distribute the proceeds from realization within 30 days from the receipt of the amount to the Stakeholders
7-Liquidator to deduct the Liquidation Cost before distribution of the proceeds to Stakeholders
8-An asset that cannot be sold readily due to its peculiar nature shall be distributed amongst the Stakeholders
9-Various Reporting to National Company Law Tribunal by the Liquidator as per the prescribed timelines provided under the
List of Stakeholders
Annual Status Report
Minutes of consultations with Stakeholders
Maintenance of Registers and Books of Accounts
Maintenance of Receipts and Payments Account
Liquidator to endeavor completion of Liquidation Process within 270 days from the Liquidation Commencement Date
Once the affairs of the Company have been completely wound up and its assets are fully liquidated, then the Liquidator shall make an application along with the Final Report to the National Company Law Tribunal for dissolution of the Company.
When the Hon’ble NCLT passes an order for Dissolution, the Company shall stand dissolved.