Creditors’ voluntary liquidation is a procedure in which the company’s directors choose to voluntarily bring the business to an end by appointing a liquidator (who must be a licensed insolvency practitioner) to liquidate all its assets. The important provisions of the creditors’ voluntary winding up are as follows −
Meeting of the Creditors
● A creditors’ meeting must be called up within two days of the day when the resolution for winding up of the company, as proposed by the creditors, is passed.
● A notice of the creditors’ meeting along with the notice of the general meeting of the company must be delivered to all the creditors of the company.
● A full-fledged report on the company’s affairs, the list of the creditors of the company and the estimated amount of claims made by the creditors should be presented by the directors before the creditors of the company.
Notice of Resolution to Be Given to the Registrar −
When a resolution of winding up of a company, as proposed by the creditors, is passed, a notice of the resolution must be delivered at the registrar’s office within 10 days from the day when the resolution is passed.
Appointment of the Liquidator
● A liquidator for the purpose of the winding up of the company may be nominated by the creditors of a company at the creditors’ meeting.
● However, if there are different persons nominated at the general meetings of the company and the creditors meeting of the company, then the person nominated by the creditors is appointed as the liquidator of the company.
Appointment of the Inspection Committee
If the creditors wish, they may appoint an inspection committee for watching over the entire process of winding up of the company.
Remuneration of the Liquidator
● The creditors fix the remuneration of the liquidator.
● If the creditors fail to fix the remuneration of the liquidator, the remuneration shall be fixed by the tribunal.
● No liquidator shall join unless a respectable remuneration is fixed.
● Once fixed, the remuneration cannot be changed.
Power of the Liquidator
● The liquidator enjoys all the powers as vested on a director.
● Further the liquidator enjoys all the powers as vested on a liquidator in case of members’ voluntary winding up according to section 494 of the Companies Act, 1956.
Duty of the Liquidator to Call General Meeting at the End of Each Year
● In case the process of winding up takes more than a year, the liquidator must call for general meetings and creditors’ meetings at the end of each year.
● The meetings should be held within three months from the end of each year or as specified by the Central Government of India.
● The liquidator must present a brief account of his actions and the matters he is dealing with and the progress of the winding up at the general meeting before all the other members of the company.
Final Meeting and Dissolution
When the affairs of the company are fully finished, the liquidator must do the following things −
● Make a report on how the process of winding up went, ensuring all the property of the company has been disposed.
● Conduct a general meeting of the company for laying the report before the company and give certain explanation about the justification of the steps he has taken for the successful winding up of the company.
● Send a copy of the report to the registrar’s office and meet the registrar to make a return of the report within one week and make a report to the tribunal about the conduct of the winding up to ensure that the liquidation went as per the members of the company’s interest.
Dissolution of the Company
● Bringing an end to the life of a company is termed as dissolution.
● No property can be held by a dissolved company.
● The company cannot be sued by the court after liquidation.
● If any property of the company still remains after the dissolution of the company, the property will be taken over by the government immediately.