Liquidation

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Liquidation

Liquidation is the process of winding up a company’s affairs and distributing its assets to its creditors and shareholders when the company can no longer continue its business operation. This deliberate decision, often initiated by passing a resolution, involves appointing a liquidator who oversees the systematic procedures for voluntary company liquidation. In India, this liquidation process is regulated by the Companies Act, 2013 and the Insolvency and Bankruptcy Code, 2016. The voluntary liquidation process typically involves several key steps: initiation of the liquidation process, appointment of a liquidator, realization of the company’s assets, payment of debts, and distribution of any remaining assets to shareholders. 

The time taken to complete the liquidation process depends on various factors such as the complexity of the company’s affairs, the extent of its assets and liabilities, and the cooperation of stakeholders.

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Things to Know About Liquidation:

Types of Liquidation

Voluntary Liquidation Services
A company can initiate voluntary liquidation if it has no debts and decides to dissolve due to a reason stated in its bylaws, such as expiration of operating period or occurrence of a dissolution event.

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Fast Track Liquidation

The Indian government had the objective of enhancing the ease of conducting business and enhancing productivity by streamlining the voluntary company liquidation process and startups under the Insolvency and Bankruptcy Code of 2016. The IBC implemented an expedited procedure, reducing the duration for liquidation from 270 days to 90 days, with an extra allowance of 45 days in case of any complexities arising. 

Liquidation of Corporate Debtor
The liquidation process for a corporate debtor starts when the resolution plan is either not submitted or rejected. The resolution professional becomes the liquidator and must make a list of the debtor’s assets to create the liquidation estate.

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