DISSOLUTION OF CORPORATE DEBTOR UNDER INSOLVENCY AND BANKRUPTCY CODE, 2016

Liquidation Regulation 44 provides that the Liquidator has to liquidate the Corporate Debtor within a period of one year from the liquidation commencement date, notwithstanding pendency of any application for avoidance of transactions before the Adjudicating Authority.  If sale as a going concern is attempted under regulation 32 A (1), the Liquidation Process may take an additional period up to ninety days.

If the Liquidator fails to liquidate the Corporate Debtor within one year, he has to make an application to the Adjudicating Authority to continue such Liquidation Process along with a report explaining why the Liquidation Process has not been completed and specifying the additional time that shall be required for liquidation.

DISSOLUTION OF CORPORATE DEBTOR

Liquidation Proceedings culminates into dissolution of the Corporate Debtor if assets have been liquidated or closure in case the Corporate Debtor has been sold as going concern.  Section 54 and Liquidation Regulation 45 deal with dissolution of the Corporate Debtor. Section 54 is reproduced as under:

  54. Dissolution of corporate debtor

(1) Where the assets of the corporate debtor have been completely liquidated, the liquidator shall make an application to the Adjudicating Authority for the dissolution of such corporate debtor.

(2) The Adjudicating Authority shall on application filed by the liquidator under sub-section (1) order that the corporate debtor shall be dissolved form the date of that order and the corporate debtor shall be dissolved accordingly.

(3) A copy of order under sub-section (2) shall within seven days from the date of such order, be forwarded to the authority with which the corporate debtor is registered.

Section 54 provides that in cases where the assets of the Corporate Debtor have been completely liquidated, the Liquidator has to make an application to the Adjudicating Authority for the dissolution such Corporate Debtor.

Liquidation Regulation 45 provides procedure of filing application to the Adjudicating Authority for closure of dissolution of the Corporate Debtor.

When the Corporate Debtor is liquidated, the Liquidator has to make a Final Report consisting of details of how it has been conducted and how the Corporate Debtor’s assets have been liquidated. If the Liquidation Cost exceeds the estimated Liquidation Cost provided in the Preliminary Report, the Liquidator has to explain the reasons for the same.

The Liquidator has to submit an application along with Final Report and the compliance certificate in form H of Liquidation Regulations to the Adjudicating Authority for closure of the Liquidation Process of the Corporate Debtor where the Corporate Debtor is sold as a going concern or for the dissolution of the Corporate Debtor in other cases.

As per Liquidation Regulation 44A, the Liquidator shall, on the advice of the Consultation Committee, provide in the application along with the Final Report filed under regulation 45 for the manner in which proceedings in respect of avoidance transactions, if any, under Chapter III or fraudulent or wrongful trading under Chapter VI of Part II of the Code, will be pursued after the dissolution or closure of liquidation process and the manner in which the proceeds, if any, from such proceedings shall be distributed.

The Adjudicating Authority on the basis of such application filed by the Liquidator, may order that the Corporate Debtor be dissolved from the date of the order and the Corporate Debtor will be dissolved accordingly.

CORPORATE LIQUIDATION ACCOUNT 

IBBI has to operate and maintain an account called the Corporate Liquidation Account in the Public Account of India. Until Corporate Liquidation Account is operated as part of the Public Account of India, IBBI has to open a separate bank account with a scheduled bank.

A Liquidator has to deposit the number of unclaimed dividends and undistributed proceeds in a Liquidation Process along with any income earned thereon till the date of deposit into the Corporate Liquidation Account before he submits an application under Liquidation Regulation 45 (3).

A Liquidator who fails to deposit to the authority into the Corporate Liquidation Account, has to deposit the same along with interest thereon at the rate of twelve percent per annum from the due date of deposit till the date of deposit.

A Liquidator has to submit to the authority with which the Corporate Debtor is registered and IBBI, the evidence of deposit of the amount into the Corporate Liquidation Account under this regulation and a statement in Form I of Liquidation Regulations setting forth the nature of the amount deposited into Corporate Liquidation Account and the names and last known addresses of the stakeholders entitled to receive the unclaimed dividends or undistributed proceeds

The Liquidator is entitled to a receipt from IBBI for any amount deposited into the Corporate Liquidation Account under this regulation.

A stakeholder who claims to be entitled to any amount deposited into the Corporate Liquidation Account, may apply to IBBI in Form J of Liquidation Regulations for an order for withdrawal of the amount.  If any person other than stakeholder claims to be entitled to any amount deposited into the Corporate Liquidation Amount, he has to submit evidence to satisfy IBBI that he is so entitled.

PRESERVATION OF RECORDS

The Liquidator has to preserve copies of all such records which give a complete account of the liquidation process. The Liquidator has to preserve electronic copies of all records for minimum period of eight years and physical copies for a minimum period of three years from the date of dissolution of the Corporate Debtor or closure of the Liquidation Process or the conclusion of any proceeding relating to the Liquidation Process, before the Board, the Adjudicating Authority, Appellate Authority or any Court, whichever is later.

In case of replacement of Liquidator, the outgoing Liquidator has to handover the records to the new Liquidator and be responsible for preserving the records not handed over, for any reason, to the new Liquidator. Where the Corporate Debtor has been sold as a going concern under Liquidation Regulation 32 (e), the general records of the Corporate Debtor have to be handed over to the successful buyer.

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