BOOK TO BE KEPT BY COMPANY LIQUIDATOR

Chapter XX (Section 270–365) of the Companies Act, 2013 (CA 2013) deals with the provisions related to winding up. Section 293 of CA 2013 provides for books to be kept by Company Liquidator.

Section 293: Books to be kept by Company Liquidator.

(1) The Company Liquidator shall keep proper books in such manner, as may be prescribed, in which he shall cause entries or minutes to be made of proceedings at meetings and of such other matters as may be prescribed.

(2) Any creditor or contributory may, subject to the control of the Tribunal, inspect any such books, personally or through his agent.

This provision came into enforce from 15th December 2016. When a liquidator is conducting a liquidation process, he requires a plethora of transactional information associated with the corporate debtor (the one who is facing liquidation). To that end, he has to collect and maintain registers quite a few books of accounts.

ACCORDING TO SCHEDULE B OF IBBI THE REGISTER LIST SHOULD BE MAINTAIN——

The mention that the liquidator has to maintain the following books and registers is given in Regulation 6 in the IBBI. The information has to be maintained in various forms that are indicated in the schedule B of the IBBI Regulations:

  1. Rule 79. Record book to be maintained by Company Liquidator-If the account books of the corporate debtor are not complete on the date of liquidation commencement, it is up to the liquidator to complete those books.
  2. Rule 80. Registers and books to be maintained by Company Liquidator-The liquidator shall maintain the following records and books only if they are applicable with the relation to the liquidation of the company:
    1. Ledger
    2. Cashbook
    3. Fixed assets and inventories Register
    4. Register for securities and incomes
    5. Register of outstanding debts and book debts
    6. Suits Register
    7. Tenants Ledger
    8. Decree Register
    9. Claims and Dividends Register
    10. Distributions Register
    11. Contributories Register
    12. Fee Register
    13. Suspense Register
    14. Documents Register
    15. Books Register
    16. Bank Ledger
    17. Register for unclaimed dividends and undistributed properties
    18. Other Register or books that might be useful through the course of the liquidation process.
  3. In order to maintain the registers that are specified under sub-regulation (2), the liquidator may refer to the forms that are indicated in Schedule III. The liquidator is allowed to make some modifications to these forms if only he deems it necessary for the liquidation process.
  4. The liquidator also has to keep the receipts of all the payments made and expenses incurred during the liquidation process.

EXPLANATION OF THIS PROVISION —–

The first clause Describing that the Company Liquidator has to mandatorily keep proper books or in any prescribed format and have to mandatorily keep a record of the entries or minutes that happened at the proceedings at the meetings or any related matters which may be required.

The second clause saying that any creditor or contributory can inspect those books kept by the Company Liquidator personally or through his agent with the permission or subject to the control of the Tribunal.

DEFINATION ACCORDING TO SECTION 530A OF CORPORATIONS ACT

When a company is placed in liquidation, pursuant to section 530A of the Corporations Act 2001, Company officers must as soon as practicable deliver to the appointed liquidator all the books in their possession that relate to the company. Further to this obligation, a liquidator has the right under section 530B of the Corporations Act 2001 to access the books and records of a company.

The definition given to “books” held or controlled by a company under the Corporations Act 2001 includes:

  • A register; and
  • Any other record or information; and
  • Financial reports or financial records, however compiled, recorded or stored; and
  • A document.

Further to the definition provided above, section 9 of the Corporations Act 2001 defines financial records as including:

  • Invoices, receipts, orders for the payment of money, bills of exchange, cheques, promissory notes and vouchers; and
  • Documents of prime entry.
  • Working papers and other documents needed to explain;
  • The methods by which financial documents are made up; and
  • Adjustments be made in preparing financial statements.

Pursuant to section 286 of the Corporations Act a company must keep written financial records and they must be retained for 7 years. Failing to keep financial records is a strict liability offence under the Corporations Act 2001.

The liquidator when they are appointed will first request that the former company officers provide to them the books and records of the company that has been placed into liquidation. If a former company officer fails to deliver to the liquidator, the company’s books or financial records (of which the company is entitled) a liquidator can make an application to the Court to order that the books and records be delivered (see section 483(1) of the Corporations Act 2001).

ASIC have compiled a list of books and records that a company should keep and of which a liquidator will be entitled to have access to when a company goes into liquidation:

  1. Financial statements
  2. General ledgers and journals
  3. Electronic copies of important documents
  4. Cash records
  5. Bank statements and loan documents
  6. Sales and debtor records
  7. Unpaid invoices
  8. Minutes of director’s meetings
  9. All relevant company registers
  10. Deeds.

POWER AND DUTIES OF COMPANY LIQUIDATORS (SECTION 290):

The Company Liquidator, in a winding up of a company by the Tribunal, shall have the power—

(a) to carry on the business of the company so far as may be necessary for the beneficial winding up of the company;

(b) to do all acts and to execute, in the name and on behalf of the company, all deeds, receipts and other documents, and for that purpose, to use, when necessary, the company’s seal.

(c) to sell the immovable and movable property and actionable claims of the company by public auction or private contract, with power to transfer such property to any person or body corporate, or to sell the same in parcels;

(d) to sell the whole of the undertaking of the company as a going concern;

(e) to raise any money required on the security of the assets of the company;

(f) to institute or defend any suit, prosecution or other legal proceeding, civil or criminal, in the name and on behalf of the company;

(g) to invite and settle claim of creditors, employees or any other claimant and distribute sale proceeds in accordance with priorities established under this Act;

(h) to inspect the records and returns of the company on the files of the Registrar or any other authority;

(i) to prove rank and claim in the insolvency of any contributory for any balance against his estate, and to receive dividends in the insolvency, in respect of that balance, as a separate debt due from the insolvent, and rateably with the other separate creditors;

(j) to draw, accept, make and endorse any negotiable instruments including cheque, bill of exchange, hundi or promissory note in the name and on behalf of the company, with the same effect with respect to the liability of the company as if such instruments had been drawn, accepted, made or endorsed by or on behalf of the company in the course of its business.

(k) to take out, in his official name, letters of administration to any deceased contributory, and to do in his official name any other act necessary for obtaining payment of any money due from a contributory or his estate which cannot be conveniently done in the name of the company, and in all such cases, the money due shall, for the purpose of enabling the Company Liquidator to take out the letters of administration or recover the money, be deemed to be due to the Company Liquidator himself;

(l) to obtain any professional assistance from any person or appoint any professional, in discharge of his duties, obligations and responsibilities and for protection of the assets of the company, appoint an agent to do any business which the Company Liquidator is unable to do himself;

(m) to take all such actions, steps, or to sign, execute and verify any paper, deed, document, application, petition, affidavit, bond or instrument as may be necessary,—

(i) for winding up of the company;

(ii) for distribution of assets;

(iii) in discharge of his duties and obligations and functions as Company Liquidator; and

(n) to apply to the Tribunal for such orders or directions as may be necessary for the winding up of the company.

The exercise of powers by the Company Liquidator shall be subject to the overall control of the Tribunal.

The Company Liquidator shall perform such other duties as the Tribunal may specify in this behalf.

Reference—–

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