Voluntary Liquidation

To alleviate the compliance burden for Insolvency Professionals (IPs), a set of forms on an electronic platform has been created by the IBBI to capture the details of the voluntary liquidation process. These forms are vital for the voluntary liquidation procedure under the Insolvency and Bankruptcy Code (IBC), as they enable systematic and transparent record keeping and seamless reporting.

The primary advantages of these forms include:

-Boosting the efficiency and effectiveness of the voluntary liquidation process.

-Allowing liquidators to conveniently access and submit forms online, reducing delays and enhancing efficiency.

-Decreasing the chances of errors and omissions, ensuring more accurate and reliable information.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2026, Q. 6A(iii) (Syllabus 2022).

Filing Forms to monitor Voluntary liquidation processes under the Insolvency and Bankruptcy Code, 2016, and the regulations made thereunder. (IBBI Circular dated 28th June, 2024)

To alleviate the compliance burden for Insolvency Professionals (IPs), a set of forms on an electronic platform has been created by the IBBI to capture the details of the voluntary liquidation process. These forms are vital for the voluntary liquidation procedure under the Insolvency and Bankruptcy Code (IBC), as they enable systematic and transparent recordkeeping and seamless reporting. The primary advantages of these forms include:

•Boosting the efficiency and effectiveness of the voluntary liquidation process.

•Allowing liquidators to conveniently access and submit forms online, reducing delays & enhancing efficiency.

•Decreasing the chances of errors and omissions, ensuring more accurate and reliable information.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2025, Q. 6A(i) (Syllabus 2022).

Regulation 9 of the Insolvency and Bankruptcy Board of India (Voluntary Liquidation Process) Regulations, 2017 deals with provisions of Preliminary Report.

Timeline for submission of Preliminary Report :-

The liquidator shall submit a Preliminary Report to the corporate person within forty-five days from the liquidation commencement date.

Preliminary Report shall provide for the following contents in detail -

The liquidator shall submit a Preliminary Report detailing-[Regulation 9(1)]

(a)the capital structure of the corporate person;

(b)the estimates of its assets and liabilities as on the liquidation commencement date based on the books of the corporate person:

Provided that if the liquidator has reasons to believe, to be recorded in writing, that the books of the corporate person are not reliable, he shall also provide such estimates based on reliable records and data otherwise available to him;

(c)Whether he intends to make any further inquiry in to any matter relating to the promotion, formation or failure of the corporate person or the conduct of the business thereof; and

(d)the proposed plan of action for carrying out the liquidation, including the timeline within which he proposes to carry it out and the estimated liquidation costs.

***

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2025, Q. 6A(iv) (Syllabus 2022).

Section 59 (6) of the Insolvency and Bankruptcy Code, 2016 provides that the provisions of sections 35 to 53 of Chapter III and Chapter VII shall apply to voluntary liquidation proceedings for corporate persons with such modifications as may be necessary.

Though the procedure to be followed for voluntary liquidation proceedings under Chapter V is largely similar to the procedure to be followed for insolvent liquidation under Chapter III of Part II of the Code yet there are marked differences:

1.Section 59 of the Code provides that a corporate person who intends to liquidate itself voluntarily and has not committed any default may initiate voluntary liquidation proceedings under the provisions of Chapter V of the Code whereas Liquidation is ordered under section 33 of the Code by the Adjudicating Authority in case of corporate debtors who have committed default and whose Corporate Insolvency Resolution Process fails.

2.Declaration of solvency and liquidation not intended to defraud any person shall be given by the majority of directors in case of voluntary liquidation whereas Liquidation is ordered in case of corporate debtor which has committed default of threshold limit.

3.Date of passing of special resolution of the members of the corporate debtor approving voluntary liquidation shall be deemed to be the date of commencement of voluntary liquidation whereas the date on which the Adjudicating Authority passes an order of liquidation under section 33 shall be deemed to be the date of commencement of Liquidation.

4.Liquidator is appointed by the Adjudicating Authority for liquidation under section 33 of the Code while Liquidator is appointed by the corporate debtor in case of voluntary liquidation under section 59 of the Code.

5.The Adjudicating Authority gives order under section 33 and then Liquidation commences while in case of Voluntary Liquidation, the liquidator shall make an application to the Adjudicating Authority for the dissolution of such corporate person after the affairs of the corporate person have been completely wound up, and its assets completely liquidated,

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2024, Q. 5(c) (Syllabus 2017).

An insolvency professional shall be eligible to be appointed as a liquidator if he, and every partner or director of the insolvency professional entity of which he is a partner or director is independent of the corporate person.

A person shall be considered independent of the corporate debtor, if he:

A person shall be considered independent of the corporate person, if he-

(a)is eligible to be appointed as an independent director on the board of the corporate person under section

149 of the Companies Act, 2013, where the corporate person is a company;

(b)is not a related party of the corporate person; or

(c)has not been an employee or proprietor or a partner-

(i)of a firm of auditors or secretarial auditors or cost auditors of the corporate person; or

(ii)of a legal or a consulting firm, that has or had any transaction with the corporate person contributing ten

per cent or more of the gross turnover of such firm, at any time in the last three years.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2023, Q. 6(b) (Syllabus 2017).

Though the procedure to be followed for voluntary liquidation proceedings under Chapter V is largely similar to the procedure to be followed for insolvent liquidation under Chapter III of the Insolvency & Bankruptcy Code yet there are marked differences:

1.To initiate voluntary liquidation proceedings, where the corporate debtor is a company, the directors have to provide a declaration of solvency and a declaration that the company is not being liquidated to defraud any person.

2.The declarations have to be accompanied by (a) the audited financial statements of the company and (b) a record of its business operations for the previous two years or the period’s incites incorporation, whichever is later.

3.Further, a report of the valuation of the assets of the company prepared by a registered valour has to be provided.

4.A resolution in favour of the voluntary winding up of the company and appointment of an insolvency professional as the liquidator has to be passed within four weeks of the declaration under clause (a) of sub-section (3) of section 59.

5.Where the company owes any debt to any person, creditors representing twothirds in value of the debt of the company shall approve the resolution passed under sub-clause (c) within seven days of such resolution.

6.A debtor who commits a default may apply, either personally or through a resolution professional, to the Adjudicating Authority for initiating the insolvency resolution process, by submitting an application.

****

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2022, Q. 6A(iii) (Syllabus 2017).

Section 2 of the Insolvency and Bankruptcy Code, 2016 as amended vide the Insolvency and Bankruptcy Code (Amendment) Act, 2018 provides that the provisions of the Code shall apply to–

a.any company incorporated under the Companies Act, 2013 or under any previous company law,

b.any other company governed by any special Act for the time being in force, except in so far as the said provisions are inconsistent with the provisions of such special Act,

c.any Limited Liability Partnership incorporated under the Limited Liability Partnership Act, 2008,

d.such other body incorporated under any law for the time being in force, as the Central Government may, by notification, specify in this behalf,

e.personal guarantors to corporate debtors,

f.partnership firms and proprietorship firms, and

g.individuals, other than persons referred to in clause (e)

in relation to their insolvency, liquidation, voluntary liquidation or bankruptcy, as the case may be.

To initiate an insolvency process for corporate debtors, the default should be at least INR 1,00,00,000. This limit was increased from INR 1,00,000 to INR 1,00,00,000 vide MCA notification dated 24th March, 2020.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2021, Q. 4(a) (Syllabus 2017).

As per regulation 37 of the Insolvency and Bankruptcy Board of India (Voluntary Liquidation Process) Regulations, 2017-the Liquidator shall present an Annual Status Report(s) indicating progress in liquidation, including-

i.settlement of list of stakeholders;

ii.details of any assets that remains to be sold and realized;

iii.distribution made to the stakeholders; and

iv.distribution of unsold assets made to the stakeholders;

v.developments in any material litigation, by or against the corporate person; and

vi.filing of, and developments in applications for avoidance of transactions in accordance with Chapter III of Part II of the Code.

The Annual Status Report shall enclose the audited accounts of the liquidation showing the receipts and payments pertaining to liquidation since the liquidation commencement date.

***

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2021, Q. 6A(iii) (Syllabus 2017).

Section 59 of the Insolvency and Bankruptcy Code, 2016 provides details process from initiation to closing of voluntary liquidation of Corporate Person whether solvent or insolvent.

Solvent bodies need to file declaration of solvency test consent of creditors having two-third in value by a suitable resolution needs to be filed with Registrar of Companies.

The liquidator, being a registered Insolvency Professional, is appointed who shall issue public announcement within 5 days of appointment for inviting claims. Thus, voluntary liquidation is initiated at the instance of members or creditors. The liquidator on completion of liquidation process shall make an application to the National Company Law Tribunal for seeking orders for dissolution of the corporate person in voluntary liquidation in terms of Section 59(7). The Tribunal having been satisfied passes orders for dissolution as per Section 59(8). A copy of such order is forwarded within 14 days to Registrar of Companies by the Tribunal.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2021, Q. 6(a) (Syllabus 2017).

Part II of Chapter XX of the Companies Act, 2013 dealing with voluntary winding up has since been deleted by the Insolvency and Bankruptcy Code, 2016 and a separate provision of section 59 has been made in the Insolvency and Bankruptcy Code for dealing with voluntary winding up of corporate persons including companies. This section provides for the initiation of voluntary liquidation proceedings by the corporate debtor which has not defaulted on any debt due to any person A corporate debtor, being a company may choose to be wound up voluntarily under several circumstances including winding up as a result of expiry of period of operation fixed in its constitutional documents or occurrence of an event provided in its constitutional documents for its dissolution.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2020, Q. 3(e) (Old syllabus).

According to the Regulation 6(1) Insolvency and Bankruptcy Board of India (Voluntary Liquidation Process) Regulations, 2017, an insolvency professional shall be eligible to be appointed as a liquidator if he, and every partner or director of the insolvency professional entity of which he is a partner or director is independent of the corporate person:

Explanation : A person shall be considered independent of the corporate person, if he

(a)is eligible to be appointed as an independent director on the board of the corporate person under section 149 of the Companies Act, 2013, where the corporate person is a company;

(b)is not a related party of the corporate person; or

(c)has not been an employee or proprietor or a partner

i.of a firm of auditors or secretarial auditors or cost auditors of the corporate person; or

ii.of a legal or a consulting firm, that has or had any transaction with the corporate person contributing ten per cent or more of the gross turnover of such firm, at any time in the last three years.

(2)An insolvency professional shall not be eligible to be appointed as a liquidator if he or the insolvency professional entity of which he is a partner or director is under a restraint order of the Board.

(3)A liquidator shall disclose the existence of any pecuniary or personal relationship with the concerned corporate person or any of its stakeholders as soon as he becomes aware of it, to the Board and the Registrar.

(4)An insolvency professional shall not continue as a liquidator if the insolvency professional entity of which he is a director or partner, or any other partner or director of such insolvency professional entity represents any other stakeholder in the same liquidation.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2020, Q. 6(c) (Old syllabus).

Provisions relating to voluntary liquidation are contained in section 59 of the Insolvency and Bankruptcy Code, 2016 and IBBI (Voluntary Liquidation Process) Regulations, 2017 that have come into effect on 1st April, 2017. The relevant sections of the Companies Act, 2013 relating to members or creditors winding-up has been deleted since then.

A resolution passed by special majority appointing none other than an Insolvency Professional as voluntary liquidator begins the initiation. Directors need to file a declaration of solvency at least 30 days prior to passing the resolution. In case there remains any creditors, 2/3rds in value of creditors should approve the resolution passed earlier within next 7 days. The resolutions need to be filed within next 7 days with ROC. The Insolvency Professional needs to be independent of corporate debtor. After realization and distribution, the voluntary liquidator files report before the Tribunal as per section 59(8) of the Code for dissolution.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2019, Q. 6A(iii) (Old syllabus).

Though the procedure to be followed for voluntary liquidation proceedings under Chapter V Part II of the Insolvency and Bankruptcy Code, 2016 is largely similar to the procedure to be followed for liquidation under Chapter III Part II of the Code yet there are marked differences as mentioned below:

1.To initiate voluntary liquidation proceedings, where the corporate person is registered as a company, the directors have to provide a declaration of solvency and a declaration that the company is not being liquidated to defraud any person.

2.The declarations have to be accompanied by (a) the audited financial statements of the company and (b) a record of its business operations for the previous two years or the period since its incorporation whichever is later.

3.Further, a report of the valuation of the assets of the company prepared by a registered valuer has to be provided.

4.A resolution in favour of the voluntary winding-up of the company and appointment of an insolvency professional as the liquidator has to be passed within four weeks of the declaration under clause (a) of sub-section (3) of section 59 of the Code.

5.Where the company owes any debt to any person, creditors representing twothirds in value of the debt of the company shall approve the resolution passed under clause (c) of sub-section (3) of section 59 of the Code within seven days of such resolution.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2019, Q. 6(a) (Syllabus 2017).