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Voluntary Liquidation under Insolvency & Bankruptcy Code (IBC) 2016
VOLUNTARY LIQUIDATION OF CORPORATE PERSONS
Voluntary Liquidation: voluntary liquidation refers to dissolution of a solvent corporate debtor with the approval of shareholders of the Company. It is a liquidation process with minimum intervention of court.
Reasons for voluntary liquidation:
When a corporate entity is incorporated for a particular purpose and such purpose has been accomplished,
When the article of a corporate entity provides for the happening of certain events and such events has been occurred,
When the corporate entity is unable to carry on the business.
Law relating to Voluntary Liquidation:
A corporate person who intends to liquidate it-self voluntarily and has not committed any default may initiate voluntary liquidation proceedings as per section 59 of IBC-2016 read with IBBI (Voluntary Liquidation Process) Regulations, 2017.
PROCEDURE FOR INITIATING VOLUNTARY LIQUIDATION DECLARATIN OF SOLVENCY BY THE DIRECTORS OF THE COMPANY
The directors of the company shall make a declaration in the form of affidavit confirming:
They have made full inquiry into the affairs of the Company and is of opinion that company has no debt,
That company is solvent and able to pay its debt in full,
The company is not being liquidated to defraud any person.
The declaration shall provide the company’s debt status as on the date accompanied with audited financial statement and record of business operation of the company for the previous two years or for the period since its incorporation and valuation report on the assets of the company prepared by registered valuer.
CONVENE BOARD MEETING:
Convene a meeting of Board of Directors of the company and discuss the following;
Approving voluntary liquidation of the company,
Appointing insolvency professional as liquidator of company for voluntary liquidation,
Fixing the day, time and place and approve notice for calling General meeting of the company. Authorizing the issuance of notice for EGM along with explanatory statement.
CONVENE GENERAL MEETING OF MEMBERS OF THE COMPANY
Convene general meeting of members of the company within 4 weeks from declaration for approval of the following;
Voluntary liquidation shall be approved by the shareholders of the company by passing special resolution,
Appoint insolvency professional to act as a liquidator.
In case company owes any debt from any person, it shall be approved by creditors representing 2/3rd in value of the debt of the company within 7 days from the date of shareholder’s approval.
(Note: MGT-14 shall be filed with the ROC within 30 days from passing special resolution)
FILINGS WITH REGISTRAR OF COMPANIES AND IBBI
The Company through its liquidator shall file the resolution passed for voluntary liquidation to the ROC in Form GNL-2 and IBBI within 7 days from resolution passed by shareholder or the subsequent approval by creditor.
Commencement of voluntary liquidation proceeding: liquidation proceeding shall be deemed to have commenced from obtaining the approval form shareholders and creditors.
APPLICATION TO THE NCLT
Once the affairs of the company are being fully wound up, the liquidator shall make an application to the adjudicating authority (i.e. the NCLT) for the dissolution of the corporate person.
ORDER OF THE NCLT
The NCLT shall pass an order that corporate person shall dissolved from the date of the order.
FILING OF ORDER OF NCLT
A copy of an order shall be forwarded to the ROC with which the company is registered, within 14 days from such order.
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