The Official liquidator is the officer of high court. He is appointed from the date of the order of the winding up. He has certain duties to perform under the Companies Act and he has to do all the required things in respect of compulsory winding up of a company according to the instruction of the high court.
The Official Liquidators are officers appointed by the Central Government under Section 448 of the Companies Act, 1956 and are attached to various High Courts. The Official Liquidators are under the administrative charge of the respective Regional Directors, who supervise their functioning on behalf of the Central Government. In the conduct of winding- up of affairs of the Companies, however, Official Liquidators act under the responsibility under Section 463 of the Companies Act, 1956 of exercising overall control over the Official Liquidators to ensure that they faithfully perform their duties and duly observe all the requirement imposed on them under the Act or the Rules there under.
A liquidator in the general sense is a person who is appointed when a company is about to wind up either by compulsion or voluntarily in order to carry out the liquidation process of the company. Before a company finally ceases to exist, it is required to realise the assets of the company which are to be adjusted against the creditors, debenture holders, and other liabilities of the company, and this is the duty of the liquidator. A liquidator comes into the picture only at the time of winding up of a company. An Official liquidator is appointed by the court at the time of compulsory winding up whereas a company liquidator is appointed by the members of the company at the time of voluntary winding up. The main aim of this article is to understand the need of a liquidator. This article at length discusses the need and role of a liquidator at the time of liquidation of a company and also explains who are eligible to be appointed as liquidators. The author has analysed various provisions of the Companies Act, 2013 and the Insolvency and Bankruptcy Code, 2016 which deal with liquidators, their powers and duties, etc. This article also enumerates and explains the procedure for appointment of a liquidator as prescribed under section 275 of the Company Act. Also, the article talks about the result of removal or resignation of a liquidator and the procedure to be followed thereafter which is prescribed under section 276 of the Companies Act. The author through this article has tried to make the reader understand the key role that a liquidator performs throughout the process of liquidation.
Appointment of Liquidator
With the passing of the Insolvency and Bankruptcy Code, 2016, a company can now be wound up under the Companies Act, 2013 only by the tribunal. The concept of voluntary winding up which was earlier available has now been removed. However, the IBC, 2016 provides for voluntary liquidation of companies. Under the Insolvency and Bankruptcy Code, 2016 a company is eligible to file for voluntary liquidation only when it has no debts or future promises to pay the full debt from the proceeds of the assets sold under the liquidation process. This is to ensure, that the liquidation process is not to defraud any of the creditors. But, when a special resolution is passed for winding up of the company by the tribunal then an application may be made by the company to the tribunal under the Companies Act, 2013.5 The IBC, 2016 has offered an easier exit route to companies opting for voluntary liquidation as compared to the one laid down by the Companies Act, 2013. The previous process of voluntary liquidation given by the Companies, Act 20013 was very complex and lengthy and it would the process would go on up to ten years but the procedure laid down by the IBC, 2016 is very simple and short. It typically comprises with the board of directors gaining approval of the shareholders and appointing a liquidator. If the books of the company show debts, then two-thirds creditors by value of the debt need to approve the resolution passed by the shareholders. After all approvals necessary are received, it must be filed with the registrar of companies and the Insolvency and Bankruptcy Board of India. Ideally the process finishes within a year.
It is now clear that companies can now be wound up only by way of tribunal under the Companies Act, 2013. A tribunal may order for winding up of a company in the cases mentioned in Section 271 of the Act. And such order is made by the tribunal on an application made by any of the individuals mentioned in the Section 272 of the Act.
Section 275 of the Companies Act, 20136 is concerned with the appointment of liquidators to manage the affairs of the company on winding up or to manage its affairs in the course of hearing the petition for winding up. This Section adopts the shift in policy in the amended Sections 448 and 450 of the 1956 Act in providing for the appointment of independent professionals as liquidators of the company. This follows the recommendations of the J J Irani Committee and the Erabi Committee for constitution of a panel comprising of professionals who could function as liquidators of the company in winding up.
The 2013 Act adopts in substance the amended Section 448 of the 1956 Act. The office of the Official Liquidator is retained under Section 359 of the 2013 Act. Under Section 275, the Tribunal will appoint the Official Liquidator or liquidator from a panel maintained by the Central Government for this purpose. The designation accorded to the liquidator appointed is “Company Liquidator”.
A liquidator appointed pending winding up orders passed is a “Provisional Liquidator”. A provisional liquidator will be appointed only from the panel of liquidators which contains names of professionals–chartered accountants, lawyers, cost accountants, company secretaries or other professionals which is constituted by the Central Government.
Winding of a company means the end of the life of the company and for this purpose a liquidator is appointed who takes over the entire winding up procedure. Currently, under Companies Act, 2013 a company can be wound up only by way of tribunal. This means, an application is to the tribunal by the company or creditors or other individuals mentioned under Section 272 of the 2013 Act. The tribunal then appoints a liquidator who is made in charge of the liquidation proceedings.
The liquidator also has an option of resigning for his duties but for this he is bound to give notice. And vacancy that arises in the office of liquidator due to any reason like removal, resignation or death is filled by appointing a new liquidator in the manner prescribed in the Act.
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