Liquidation
Resolve your corporate challenges effortlessly with our expert liquidation services. Trust us to guide you through the process, ensuring a smooth transition.
What is Liquidation?
Liquidation is the formal process of winding up a company’s affairs and distributing its assets to creditors and shareholders when the company can no longer continue its business operations.
The Companies Act, 2013, and the Insolvency and Bankruptcy Code, 2016 govern this process. In India, liquidation typically involves several steps: initiating the process, appointing a liquidator, realizing the company’s assets, paying off debts, and distributing remaining assets to shareholders.
The duration of the liquidation process depends on various factors, including the complexity of the company’s affairs, the extent of its assets and liabilities, and the cooperation of stakeholders.
Key Points about Liquidation
- Enhances senior management accountability and responsibility.
- Builds investor trust in the entity’s operations and financial reporting procedures.
- Creates timely and reliable financial information.
- Reduces fraud and mistakes through prevention.
Types of Liquidation
A company can choose voluntary liquidation if it has no debts and decides to dissolve due to reasons stated in its bylaws, such as the expiration of the operating period or the occurrence of a dissolution event.
Appointment/Replacement of Liquidator
Initially appointed by the resolution professional, the liquidator can be replaced by the concerned authority if the plan is rejected or a replacement is recommended. The board then recommends a new liquidator, subject to approval.
Liquidation Estate
The liquidator must list all the debtor’s assets to create the liquidation estate, as specified by the IBC, which includes eligible assets.
Consolidation Claims
Creditors can make their claims to the liquidation estate within 30 days, and they can also withdraw their claims within 14 days of submission. This is followed by claim validation and the right to appeal against the liquidator.
Distribution of Assets on Liquidation
Once the final order is passed, the estate’s proceeds are used to pay off creditors. After this, a stay order is placed on all legal suits and proceedings against the debtor, followed by the stage of Dissolution of the Corporate Debtor.
WBN Consulting Specializes In
Fast Track Liquidation:
The Indian government aimed to improve the ease of doing business and increase efficiency by introducing a fast-track liquidation process for startups and smaller companies through the Insolvency and Bankruptcy Code of 2016. The fast-track process reduces the liquidation time from 270 days to 90 days, with an additional 45 days allowed for complications.
Liquidation of Corporate Debtor:
The liquidation process for a corporate debtor commences when the resolution plan is either not submitted or rejected. In such cases, the resolution professional becomes the liquidator and must list the debtor’s assets to create the liquidation estate.
