The Insolvency and Bankruptcy Code, 2016 (IBC) not only allows the insolvency proceedings of the insolvents but the Code also lays down provisions for those solvent companies who want to dissolve their business. The position of the solvent company must be that it is able to pay off its debts to be qualified for voluntary liquidation. Section 59 of the Code specifies Voluntary Liquidation of the Corporate Persons.

Even after the Companies Act, 2013 came and before the IBC was enacted, the voluntary winding up of companies was seen by High Courts. After the latest provision, Voluntary Liquidation of Corporate Person including Company can take place under Section 59 of the Code.

Meaning of Voluntary Liquidation

Voluntary Liquidation means that a company is to be liquidated at the wish of members. It is a private liquidation proceeding where the intervention of Courts is very minimal. This process is carried out in situations where:

1. The entity was formed with a specific objective and now it has been fulfilled;
2. It is provided by the articles that the entity should be liquidated on the occurrence of an event and that event has occurred;
3. It is unable to carry its own business.

Rules that need to be followed before commencement of the Voluntary Liquidation are declaration of solvency, members approval, creditors approval, and communication to ROC and IBBI. Voluntary liquidation commence after receipt of the required approval, the voluntary liquidation process shall be deemed to commence from the date on which special resolution is passed by the members along with the approval of creditors. Effect of Liquidation includes end of carrying out business by corporate person from liquidation commencement date and it shall carry business only for the beneficial winding up of business.

The Process of Voluntary Liquidation

• Appointment of Liquidator
  The members of the company after declaration of solvency shall pass special resolution for the appointment of Insolvency Professional to tackle the voluntary liquidation process. Only eligible insolvency professionals shall be appointed as liquidator.
   
• Public Announcement by Liquidator
  The liquidator shall make a public announcement within five days of his appointment. Then the liquidator shall request the stakeholders to submit their claims.
   
• Submission of proof of claim by creditors
  Following the public announcement by the liquidator, all persons who claim to be stakeholders of the corporate person shall be submitted and prove their claim for debts. The persons who claim to be the creditors or stakeholders of the corporate creditor need to submit their proof of claim.
   
• Verification of claims
  The liquidator on receipt of claims needs to verify the claims received within a period of 30 days from the last date by which claims were expected to be submitted by the creditors. While verifying the received claims, liquidator may accept or reject the received claims.
   
• Preparation of list of stakeholders
  After verification of received claims, the liquidator prepare a list of stakeholders keeping in mind the claims received and accepted by him. The list shall be prepared within 45 days from the last date for receipt of the claim.
   
• Realization of Assets of the corporate person
  After the list of stakeholders is prepared, the liquidators need to commence with realization of the assets of the corporate person. The liquidator by himself or with the help of a registered valuer confirm the value of the assets in the prescribed manner agreed by the corporate person.
   
• Opening of corporate person's separate bank account
  With realising the assets of the corporate person, the liquidator also needs to open a separate bank account in a bank especially for the voluntary liquidation for collecting all money due to the corporate person. Also, the bank account name must contain in voluntary liquidation.
   
• Distribution of the realized proceeds
  After realization of assets and opening of bank account the liquidator then distribute the proceeds received by realizing the assets of the corporate person within a period of 6 months from the date of receipt of the amount among the stakeholders.
   
• Preparation of Final Report
  After the distribution of the assets of the corporate person, the liquidator needs to draft a final report of the liquidation process including the audited accounts of the liquidation along with the report. After the report is prepared by the liquidator, it needs to be sent to the concerned registrar of companies, both NCLT and the Insolvency and bankruptcy board.
   
• Application for dissolution of the corporate person
  After completion of affairs of the corporate person and its assets realisation and distribution among the stakeholders, the liquidator need to file an application to the concerned adjudicating authority regarding dissolution of the corporate person.
  
  The adjudicating authority then needs to pass a dissolution order in favour of the corporate person mentioning that the corporate person stands dissolved from the date of the order.

Functions of the liquidator in voluntary liquidation:

• Verification claims of all the creditors
• Carry out the business of the corporate debtor for its beneficial liquidation.
• Establishing value, to sell or recover and realizing all assets and money due to corporate person in a time bound manner.
• Opening a separate bank account for collecting all money due to the corporate person.
• Paying and settling the creditors of the corporate person.
• Obtaining any professional aid from any person or appointing a professional to discharge his duties.
• To distribute proceeds to the stakeholders within six months of receipt of the proceeds.
• To maintain a physical or an electronic copy of the reports, registers and books of account for a minimum eight years after the dissolution of the corporate person.

Conclusion
The introduction of new regulations by the Government is beneficial as they run the process of voluntary winding up in a time-bound manner. It is a step in the right direction and is appreciated by the corporates as well as professionals. The IBBI has changed the process of liquidation to make it time-bound. The new rules require the process to be finished within one year of its commencement. It is clear that voluntary liquidation is a process for winding up the affairs of a company without much difficulties or conditions. It introduced easy exit for solvent companies which voluntarily wish to do so given that they cleared or have the capability to clear off their debts.