Voluntary Liquidation or Voluntary completing of a corporation in India is run under Insolvency and Bankruptcy Code, 2016. Voluntary Liquidation is that the process of liquidating the corporate with the approval of its members. A company usually goes for a voluntary liquidation when its members decide to not continue its business operations. The main objective is to discontinue the operations and distribute its assets while also paying its debts.
`STEP 1: Declaration of Solvency by Board / Designated Partners
The Directors of the corporate has got to make a Declaration of Solvency in sort of an Affidavit confirming following that:
• the corporate has not committed any default of repayment of debt and
• the corporate is solvent and it’ll be ready to pay its debts fully from the proceeds of assets to be sold within the voluntary liquidation; and
• the corporate isn’t being liquidated to defraud a person .
The declaration of solvency should be filed in Form GNL-2 with the Registrar of Companies
STEP 2: Identify an Insolvency Professional as Liquidator
The Board has got to identify an Insolvency Professional, who is registered with Insolvency and Bankruptcy Board of India (IBBI) to act as Liquidator to conduct the voluntary liquidation process.
STEP 3: Convene Board Meeting
Convene a meeting of Board of Directors to decide the following:
• Approving voluntary liquidation of the company
• Appointing an Insolvency Professional because the Liquidator of the corporate
• Fixing day, date and time for general meeting of the corporate and Issue notice of the EGM containing the proposed resolution along side the explanatory statement.
Step 4: Convene General Meeting of Shareholders
Convene a General Meeting of shareholders within 4 weeks of Declaration of Solvency and pass the subsequent resolutions:
• Special Resolution generally meeting for liquidating the corporate voluntarily or a standard resolution for liquidating as a results of expiry of any fixed period of its existence in articles
• Resolution appointing Liquidator of the company
STEP 5: Filings with Registrar of Companies and IBBI by the liquidator
STEP 6: Liquidator is In-charge of the company:
He shall Proceed with further steps which shall include realization of assets of the company, settlement of outstanding dues and distribution of proceeds to the stakeholders. The liquidator shall have the facility to consult any stakeholders who is entitled to the distribution of the proceeds.
STEP 7: Public Announcement:
The liquidator shall make public announcement within 5 days from his appointment in Form A of Schedule I calling stakeholders to submit their claims within 30 days from liquidation commencement date.
The liquidator shall submit a preliminary report back to the corporate within 45 days from the commencement of liquidation stating:
• the capital structure of the corporate person;
• the estimates of its assets and liabilities as on the liquidation commencement date supported the books of the company person:
• whether he intends to form any longer inquiry in to any matter concerning the promotion, formation or failure of the company person or the conduct of the business thereof; and
• the proposed plan of action for completing the liquidation, including the timeline within which he proposes to hold it out and therefore the estimated liquidation costs.
Step 9: Opening of Bank Account
The liquidator shall open a checking account during a scheduled bank within the company’s name followed by the words “in voluntary liquidation’ for receiving all the money’s due and realized to meet liquidation cost. All payments made above 5000 rupees shall be done only by drawing cheque or through online banking transaction.
Step 10: No-Objection from Tax Authorities
The liquidator has to obtain a No-Objection Letter from the Tax authorities of the place where the registered office of the company is situated.
Step 11: Realization of Assets
The liquidator shall recover and realize the assets of the corporate during a time-bound manner maximizing the worth of the stakeholders. The money realized shall be deposited in the bank account opened for this purpose.
Step 12: Distribution
The money realized from the proceeds shall be distributed to the stakeholders within 6 months from the receipt of the quantity after deducting the liquidation cost. If any asset can’t be realized thanks to its nature or other circumstances, liquidator may distribute it intrinsically with the approval from the corporate .
Step 13: Completion of Liquidation
The liquidator has got to complete the method of liquidation within 12 months from the date of commencement of liquidation.
Step 14: Liquidation extending beyond 12 months and Annual Report
The liquidator has got to hold a gathering of contributories within 15 days from the top of 12 months and at every succeeding 12 months until the corporate is fully dissolved. He shall also present an annual report showing the progress of liquidation
Step 15:Final Report
Once the Liquidation process is completed, the liquidator has got to prepare the ultimate Report containing:
• audited accounts of the liquidation
• a statement showing the assets are disposed, debts are discharged and no litigation is pending
• a purchase statement of assets showing realized value, its cost, manner and mode of sale, any shortfall, to whom it’s sold etc
Step 16: Filing
The Liquidator shall then file the ultimate report with the Registrar and therefore the IBBI.
Step 17: Application to NCLT
When the affairs of the corporate are completely aroused , the liquidator has got to make an application to NCLT for dissolution of the corporate .
Step 18: Order by NCLT
The NCLT shall then pass an order that the corporate shall stand dissolved from the date of the order.
Step 19: Filing of Order
The copy of order shall then be forwarded to the registrar where the company is registered.
Step 20: Preservation of records
The liquidator has got to preserve the reports, registers and books of accounts for a minimum of 8 years after the dissolution of the corporate.
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