The Insolvency and Bankruptcy Code (IBC), 2016, has consolidated and amended the laws in relation to insolvency of Companies, Partnership Firms, and Limited Liability Partnership into a single legislation. This provided time-bound resolution and licensed the creditors to initiate the insolvency resolution process if in case default occurs. In exercise of the powers conferred by sections 59, 196 and 208 read with section 240 of the Insolvency and Bankruptcy Code, 2016, the Board hereby makes the Regulations, which will be called as the Insolvency and Bankruptcy Board of India (Voluntary Liquidation) Regulations, 2017. The Insolvency and Bankruptcy Board of India has notified this on March 31, 2017 ("New Regulations") the Insolvency and Bankruptcy Board of India (Voluntary Liquidation Process) Regulations, 2017. These New Regulations provides the process for initiating voluntary liquidation by a corporate person i.e., companies, limited liability partnerships and any other persons incorporated with limited liability. Voluntary Liquidation The Insolvency and Bankruptcy Board of India (IBBI) has Section 59 which deals with Voluntary Liquidation, whereas the Voluntary Liquidation process before IBC was provided in Companies Act 2013. Voluntary Liquidation is a process when a company self imposes to wind up and dissolve itself after approval of its shareholders. It happens when a company turns to be insolvent and is unable to pay for its liabilities. Now, the Government through Notification has repealed the provision of Voluntary Liquidation under Companies Act 2013. The Companies Act 2013 had 20 Sections have for Voluntary Liquidation, but the IBC 2016, vide Chapter V of Part II consists only of one Section i.e. Section 59, which deals with voluntary liquidation. The key difference between Companies Act and IBC 2016 is that under Companies Act, the process of Voluntary Liquidation was classified into 2 types which are Members Voluntary winding up and Creditors Voluntary winding up. These distinctions made by Companies Act have been officially eliminated by Section 59 of IBC 2016. Commencement Of Voluntary Liquidation Initiation of Voluntary Liquidation 1. A corporate person, other than a company, intends to liquidate itself voluntarily, such as designated partners, or a corporate person is a limited liability partnership or persons responsible for exercising its corporate powers but if that corporate person is not a company or a limited liability partnership it has to make a declaration, verified by an affidavit declaring that— A full inquiry has been made regarding the affairs of the corporate person, and it has been opined that the corporate person has no debt or if any it will be able to pay its debts in full from the proceeds of assets to be sold in the voluntary liquidation; and The corporate person is not being liquidated to defraud any person. 2. A declaration under sub-regulation (1) shall be accompanied by- Audited financial statements and record of business operations of the corporate person for the previous two years or for the period since its incorporation, whichever is laterA report of the valuation of the assets of the corporate person, if any, prepared by a registered valuer 3. Thereafter, within four weeks of a declaration under sub-regulation(1) A resolution shall be passed by the special majority of the partners or contributories, of the corporate person requiring the corporate person has been liquidated voluntarily and appointing an insolvency professional who will act as the liquidator; or, A resolution passed by the majority of the partners or contributories, of the corporate person requiring the corporate person has to be liquidated voluntarily as a result of expiry of the period of its duration, which was fixed by its constitutional documents or on the occurrence of any event in respect of which the constitutional documents provide that the corporate person has to be dissolved and for that appoint an insolvency professional who will act as the liquidator. 4. A resolution passed under sub-regulation (3) or under section 59(3)(c), as the case may be, must contain all the terms and conditions for the appointment of the insolvency liquidator, including the remuneration due to him. Ratification by Creditors 1. When the corporate person owes any debt to any person, the creditors by representing two thirds in value of the debt of the corporate person has to approve the resolution passed under Regulation 3 within seven days of that resolution. 2. The Board of Directors or the designated partners must require the documents referred to in Regulation 3(1) and (2) to be presented to a creditor for his approval to be obtained. Commencement of voluntary liquidation A voluntary liquidation for a corporate person other than a company must be deemed to have commenced from the date of passing of the resolution under Regulation 3(3). Read, Also: Cross Border Insolvency and Bankruptcy. Effect of voluntary liquidation on status of corporate person The corporate person must from the commencement date of voluntary liquidation cease to carry on its business except as far as it is required for the beneficial winding up of its business. Provided that the corporate state and corporate powers of the corporate person will be continue to exist until it is dissolved. Appointment And Remuneration Of Liquidator Eligibility for appointment as liquidator 1. An insolvency professional can be eligible to be appointed as a liquidator if he is independent from every partner or director of entity which a corporate person is going to be dissolved. Explanation– A person shall be considered independent of the corporate person, if he- 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;is not a related party of the corporate person; orhas not been an employee or proprietor or a partner of a firm of auditors or company secretaries or cost auditors of the corporate person or 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, in the last three financial years. 2. A liquidator has to 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. 3. An insolvency professional will not continue as a liquidator of which he is a director or partner, or any other partner or director of such insolvency entity represents any other stakeholder in the same liquidation. Liquidator’s remuneration: The remuneration due to the liquidator shall form part of the liquidation cost. Procedure Of Liquidation And Distribution All money to be paid in to bank account 1. The liquidator has to open a bank account in the name of the corporate person followed by the words ‘in voluntary liquidation’, for the receipt of all moneys due to the corporate person. 2. The liquidator must pay the credit of the bank account opened under sub-regulation(1) all moneys, including cheques and demand drafts received by him as the liquidator of the corporate person, and the realizations of each day has to be deposited into the bank account without any deduction. 3. All payments out of the account by the liquidator above five thousand rupees must be made by cheques drawn or online banking transactions against the bank account. Distribution 1. The liquidator must distribute the proceeds from realization within six months from the receipt of the amount to the stakeholders. 2. The liquidation costs will be deducted before such distribution is made. 3. The liquidator may, with the approval of the corporate person, distribute amongst the stakeholders, also an asset that cannot be readily or advantageously sold due to its peculiar nature or other special circumstances. Return of money A stakeholder must forthwith return any amount received by him in distribution, which he was not entitled to at the time of distribution, or subsequently will not became entitled to. Completion of liquidation 1. The liquidator will endeavor to wind up the affairs of the corporate person within one year from the voluntary liquidation commencement date. 2. In the event of the voluntary liquidation continuing for more than one year, the liquidator will call a meeting of the contributories of the corporate person within fifteen days from the end of the year in which he is appointed, and at the end of each succeeding year and shall present a Status Report indicating progress in liquidation, including- settlement of list of stakeholders,details of any property that remain to be sold and realized,distribution made to the stakeholders, anddistribution of unsold property made to the stakeholders;developments in any material litigation, by or against the corporateperson; andFiling of and developments in applications for avoidance of transactions in accordance with Chapter III of Part II of the Code. 3. The Status Report will enclose an audited account of the voluntary liquidation showing the receipts and payments pertaining to liquidation since the liquidation commencement date. Final report prior to dissolution 1. When the affairs of the corporate person are fully wound up, the liquidator shall prepare a Final Report consisting of - An audited account of the voluntary liquidation, showing the receipts and payments pertaining to liquidation since the liquidation commencement date; and a statement demonstrating that-the assets of the corporate person have been disposed of;the debt of the corporate person has been discharged to the satisfaction of the creditors;No litigation is pending against the corporate person.A sale statement in respect of all assets containing –the realized value;cost of realization, if any;the manner and mode of sale; if the value realized is less than the value assigned by the registered valuer in the report of the valuation of assets prepared in accordance with section 59(3)(b)(ii) or Regulation 3(2)(b), as the case may be;the person to whom the sale is made; andAny other details of the sale. 2. The liquidator shall send the Final Report by registered post at their registered address by electronic means to – the contributories of the corporate person;the Registrar; andthe Board, 3. The liquidator shall submit the Final Report to the Adjudicating Authority along with the application under section 59(7). Steps For Proceedings After the said amendment, all cases filed on or after the 01 April 2017 shall be governed by the Insolvency and Bankruptcy Code of India and the adjudicating authority shall be shifted from High Court to National Company Law Tribunal only. However, as per Rule 4 of the Companies (Transfer of Pending Proceedings) Rules, 2016, which was notified in December 2016 and came into effect from April 2017, states that Voluntary Liquidation of companies pending before any High Court before April 01, 2017 shall be dealt by that High Court only. But any fresh Voluntary liquidation process initiated on or after April 01, 2017, shall be instituted before the Hon`ble National Company Law Tribunal and shall be governed by the IBC 2016 and regulations thereof. Under the new amended regulations, the Government has not just simplified the process of Voluntary Liquidation but has also specified time limits or rather time period for various compliances. The procedure for the process of Voluntary liquidation as per the amended regulation is summed up as below specified:- STEP I: A document is to be submitted called Submission of Declaration to Registrar of Companies, which shall state that the said company shall or should be able to pay off its debt and it has started the process of voluntary liquidation to not defraud any person or entity; STEP II: A Special Resolution shall be passed to approve the process of voluntary liquidation and an Insolvency Professional shall be appointed as a liquidator (“Approval“), within a time frame of four weeks after the submission of declaration. An approval of 2/3rd of the creditors shall also be required if the said corporate person has any unpaid debts. STEP III: As soon as the Approval is granted a Public Notice is to be announced within 5 days of such approval in Newspapers as well as on the website (if any) of the Corporate Person inviting claims or objections of all stakeholders involved. STEP IV: Intimation about the grant of Approval is to be sent within seven days of such Approval to the Registrar of Companies and the Board; STEP V: The preliminary finding of the authorized capital, approximations of asset and liabilities, the proposed plan of action etc., is to be made into a Report called Preliminary Report, which shall and submitted to the corporate person within a period of Forty-Five days of the said Approval; STEP VI: Within Thirty days from the last day of receipt of claims, verification of such claims shall be done and Within Forty-Five days from the last day of receipt of claims, the list of stakeholders involved shall be done. STEP VII: A bank account on the name of the said Corporate Entity which shall be followed by the words’ involuntary liquidation’, in any of the scheduled banks, for the purpose of receipt of all amount due to the corporate entity; STEP VIII: The process of sale of all the assets of the Corporate Person and the recovery of amounts which are due to the corporate person and the realization of capital which are uncalled or unpaid in nature or are contributions which are unpaid, shall be done; STEP IX: The amounts received from the realization of the Capitals shall be distributed within a period of six months to all the stakeholders involved; STEP X: A Final Report is to be submitted by the Insolvency Professional appointed as the Liquidator for the Corporate person`s Voluntary Liquidation. Registrar of Companies and the Board shall also submit the final report. STEP XI: An application is to be sent to the Hon`ble National Company Law Tribunal for the dissolution or winding up or voluntary liquidation of the Corporate Person, STEP XI: After the application is submitted to the Hon’ble National Company Law Tribunal, it`s order of dissolution of the Corporate Person shall be submitted within a period of fourteen days to the Registrar of Companies. Conclusion Prior to the above Notification which notified the Insolvency and Bankruptcy Board of India (Voluntary Liquidation Process) Regulation 2017 (“The Regulation”) and introduced the concept of Voluntary Liquidation process which was governed by the provisions under Companies Act 2013 were not notified. Thereby meaning that voluntary liquidation or winding up of company continued to be governed by Companies Act before the Government introduced the notification on Section 59 of the IBC in 2017. Now, the IBC enables the insolvency proceedings of the Corporate Debtor turning Insolvent and also contains provisions for Companies who want to surrender their business and give up their right to carry on the same. Thus we see that Section 59 of the IBC expedites the whole process by removing the ambiguities and bringing a timeline to the whole process. Also, Read: Timeline for Corporate Insolvency Resolution Process.