Company Wound up Voluntarily

A company wound up voluntarily or through voluntary liquidation is one of the same things. As per Insolvency and Bankruptcy Code Section 59, together with the Insolvency and Bankruptcy Board of India Regulations, 2017, the device for voluntary liquidation of a corporate entity. The company wound up voluntarily, With the approval of creditors and shareholders of the company, the dissolution of a solvent company can be done.

What company wound up voluntarily?

The Company Wound up Voluntarily, the voluntary winding up of a company initiated the closure process. Unlike a forced closure, it happens when the company is either healthy (solvent) or struggling (insolvent) but decides to shut down. Shareholders call the shots if solvent, while creditors take control if the company can’t pay its debts. The process by which the company wound up voluntarily involves selling assets, paying off creditors, and finally dissolving the company.

Who may initiate voluntary liquidation?

A company that wants to liquidate itself voluntarily and has not committed any defaults can initiate voluntary liquidation.

Steps for Company Wound Up Voluntarily or Voluntary Liquidation:

The step-by-step procedure for voluntary liquidation is laid out in Section 59 of the IBC. The Section has been summarized below to guide you through the process of liquidating a company under IBC, 2016:

Step 1: Company Wound up Voluntarily Declaration of Solvency

The majority of directors give a declaration of solvency, which should be verified by an affidavit.

In an affidavit stating that:

• They have made a complete investigation related to the company and formed a legal opinion about that.
• It has no debt or.
• If it has a debt, it will be able to pay its debts completely through the sale of the asset in the voluntary liquidation proceeding.
• The company is not liquidated for defrauding any person.

Documents attached to the Solvency Report:

(a) Audited financial statements and record(s) of business operations of the company for the previous 2 years, or for the period since its incorporation, whichever is most recent;

(b) The registered valuer prepared the valuation report of the assets of the company.

Step 2: The company wound up voluntarily for meeting to pass a Special Resolution

The designated partners are required to convene a general meeting. They pass a special resolution to

• Appoint an Insolvency professional (IP) registered with the IBBI to act as a Liquidator
• (If mentioned in the Articles of Association) A resolution to liquidate the company voluntarily due to expiration of time or due to mutual conclusion by the members voluntary liquidation.

Note: This must be done within Four weeks of submitting the declaration of solvency.

Creditor Approval (if any)

The creditors voluntary liquidation of the company shall approve the voluntary liquidation of 2/3 of the value of the debt within 7 days from the date of shareholder approval.

Step 3: File with the IBBI and Registrar Of Companies (ROC)

The Company shall then intimate the IBBI OR THE ROC Regarding the resolution passed by the board of Directors to liquidate the company. Notification to the ROC and Board of Director must be done within seven days of passing the resolution.

Step 4: Liquidator will takeover the company

Once the National Company Law Tribunal passes an order for liquidation and appoints the liquidator, the liquidator takes complete charge of the company, and the powers of the board of directors are suspended. The liquidator will get full cooperation from the company.

The liquidator shall proceed further to take possession of all the assets and determine their realizable value.

Step 5: Make a public announcement and verify all the claims.

During the Liquidation of the company, the liquidator, after being appointed, must make a public announcement in one vernacular language newspaper and an English newspaper.

Post-publication, the liquidator must consolidate all the claims received by financial (secured and unsecured) creditors, Operational creditors, workmen and employees, and other stakeholders.

The liquidator must verify all the claims and either accept or reject them within 30 days of receiving the claim’s last date.

The liquidator shall inform the claimant regarding the decision within seven days of verifying the claim.

Step 6: Prepare a list of Stakeholders:

As per Regulation 30[1] of the Insolvency and Bankruptcy Board of India (Voluntary Liquidation) Regulations, 2017, the liquidator, after verifying all the claims, must prepare a list of all the stakeholders in the voluntary liquidation process based on the claims verified within 45 days from the last date of receipt of claims.

Step 7: Form an opinion on all Preferential, Undervalued, Extortionate, and Fraudulent Transactions

The liquidator at the relevant stage of liquidation or liquidation of the company must form an opinion on the avoidance transactions. The liquidator can appoint a transaction or forensic auditor to determine the company’s preferred, undervalued, extortionate, and fraudulent transactions.

After post-examination of the report from the transaction auditor or forensic auditor, the liquidator must file an application with the adjudicating authority stating all the avoidance transactions made by the corporate debtor (if any).

The liquidator must establish that the transaction made was within one year of the commencement date and two years of the commencement date in the case of related party transactions.

Step 8: Realization and Distribution of Assets

The liquidator may value and sell the property/assets of the corporate person in any manner approved by him. The liquidator must recover and realize all available assets at their maximum value.

The money realized from the sale of assets shall be distributed accordingly to all the stakeholders within six months of realising the amounts. The costs incurred by the liquidator during the Liquidation of the company/liquidation will be deducted before distributing the amounts. The distribution shall be made as per Section 53 of the IBC, 2016.

Step 9: Timelines for Completion of Liquidation While Liquidation of the Company

The liquidation process must be completed within a year of the commencement of the liquidation of the company/liquidation.

If the process exceeds 12 months, then the liquidator shall:

1. Convene a meeting with all the contributors and stakeholders within 15 days from the last date of the liquidation of the company/liquidation.
2. The liquidator shall present a progress report of the current stage of the liquidation or liquidation of the company. This includes:

• Settlement List of Stakeholders.
• Details of properties or assets that are yet to be sold and realized.
• Distribution made to the stakeholders to date.
• Update on the development of any material litigation against the company (if any).
• The liquidator filed the application before the adjudicating authority.

3. The progress report shall be annexed with the audited accounts of all the receipts and payments made by the liquidator for and during the Liquidation of the company/liquidation process.

Step 10: Submission of the final report after completion

When the company is wound up, the liquidator shall prepare and submit a final report of the process containing the following:

• The liquidator will make audited accounts of all the receipts and payments made during the liquidation of the company.
• A statement containing a list of all assets sold/realized and the money distributed to all the stakeholders. It should also show that there are no pending litigations against the corporate person.
• An independent sale statement concerning all assets shows the realized value and the mode and method of selling the asset
• Details of the buyer to whom the assets are sold.

The Liqidator shall submit this final statement to the following:

• The contributors of the corporate person.
• The Insolvency and Bankruptcy Board of India; and.
• The Registrar.

The final stage is submitting this report and an application under Section 59(7) with the adjudicating authority. Once the adjudicating authority passes the order under IBC, the liquidator shall preserve all the records, such as reports, registers, and books of accounts, for at least eight years after the dissolution.

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