Liquidation Process
Voluntary Liquidation is covered under which section of IBC
Section 59 of the Insolvency and Bankruptcy Code 2016
What does IBC stand for?
Insolvency and Bankruptcy Code of 2016.
What does the term 'liquidator' refer to?
A liquidator is a person appointed to wind up the affairs of a company during liquidation.
In which scenario would a company consider voluntary liquidation?
A company may consider voluntary liquidation when it is no longer able to continue its business operations due to lack of profitability or because its owners wish to retire.
Fresh Start Process is covered under which sections of IBC, 2016?
Section 80 to 93 of the Insolvency and Bankruptcy Code, 2016
What is the first step in the voluntary liquidation process under the IBC 2016?
The company must pass a special resolution for liquidation, and the declaration of solvency must be submitted to the Registrar of Companies (RoC).
What does IBBI Stand for?
Insolvency Bankruptcy Board of India
What is meant by ‘winding up’ in the context of voluntary liquidation?
Winding up is the process of dissolving a company by selling its assets, settling its debts, and distributing the remaining assets to shareholders.
What happens if a company's creditors do not agree to a voluntary liquidation?
If creditors do not agree, the company may have to go through corporate insolvency resolution process (CIRP) instead of voluntary liquidation.
Fresh Start Process is covered under what Chapter of the Code
Chapter II Part III
How long does the voluntary liquidation process typically take under the IBC?
The voluntary liquidation process should generally be completed within 270 days
Which type of liquidation is applicable when the company is solvent?
Members' Voluntary Liquidation is for solvent companies under the IBC.
What is the ‘order of priority’ when distributing assets during liquidation?
The order of priority for distribution in voluntary liquidation is: secured creditors, unsecured creditors, and then shareholders.
A company has been unable to generate profits for several years. Its shareholders decide to initiate voluntary liquidation. What document must the company submit to the Registrar of Companies (RoC)?
The company must submit a declaration of solvency to the Registrar of Companies (RoC), confirming that it can pay its debts in full within a specified period. If the company is solvent, members' voluntary liquidation is the most likely process.
What does not form a part of Qualifying Debt?
Qualifying Debt excludes
1. an excluded debt;
2. a debt to the extent it is secured; and
3. any debt incurred 3 months prior to the date of the application
Who appoints the liquidator in a voluntary liquidation under the IBC?
The company shareholders appoint the liquidator by a resolution.
What is the role of the Adjudicating Authority under the IBC?
The Adjudicating Authority (National Company Law Tribunal or NCLT) oversees the insolvency process, including voluntary liquidation applications.
What does ‘insolvency’ mean under the IBC?
Insolvency refers to the inability of a company to pay its debts as they fall due or when the company’s liabilities exceed its assets.
If a company’s voluntary liquidation proceedings are challenged by creditors, which authority would oversee the dispute resolution under the IBC?
The National Company Law Tribunal (NCLT) is the authority that resolves disputes in voluntary liquidation cases under the IBC
Who is eligible to initiate Fresh Start Process under IBC, 2016? Mention and 4 conditions
1) GAV max 60,000
2) Value of Assets max 20,000
3) Qualifying Debts max 35,000
4) Does not own a dwelling unit
5) Person shall not be undischarged bankrupt
What happens if a company fails to complete the liquidation process within the prescribed timeline under the IBC?
The liquidator can apply to the Adjudicating Authority (NCLT) for an extension, but if liquidation is not completed, the company may face corporate insolvency proceedings.
What does a declaration of solvency mean in voluntary liquidation?
A declaration of solvency is a statement from the company’s directors confirming that the company is solvent and able to pay off its debts in full within a specified period.
Independence criteria of Liquidator
1) Can be appointed as an Independent Director
2) Is not a related Party
3) Has not been an employee or partner for the last 3 Financial Year
Mention the Case Law we discussed
Nippie Toyoma India Private Limited
Effects of Moratorium
Mention 4
1) Cannot act as Director
2) Cannot take part in the formation of company
3) Does not dispose off this assets
4) Inform Business Partner about FSS
5) Prior intimation before entering into a Financial Transaction
6) Disclose name before entering Business Transaction
7) Does not travel outside India without the permission of AA