Section 2: the provision of this code shall apply to:

1. Company Inc under companies act

2. company governed by any special act
3. Limited liability partnership incorporated under the Limited liability partnership
act 2008
4. anybody incorporated under any law for the time being in force
5. partnership firms and individuals.

Section 3: definitions:

4. Charge: an interest or lean created on the property or assets of any person or any of
its undertakings or both as security and includes a mortgage.

6. Claim:
A: a right to payment;
B: a right remedy for breach of contract under any law if such breach gives rise to a right
to payment.

10. Creditor: means any person to whom a debt is owed and includes a financial creditor,
and operational creditor, a secured creditor, an unsecured creditor and a decree holder.

11. Debt: a liability or obligation in respect of a claim which is due from any person and
includes a financial debt and operational debt.

13. Financial information in relation to a person

a. Records of the debt of the person;
b. records of liabilities when the personal is solvent
c. Records of assets of a person over which security interest has been created
d. Records of instances of default by the person against any debt
e. Records of the balance sheet and cash flow statement of the person
f. Such other information as may be specified

14. Financial institution

a. Scheduled bank
b. Financial institution under section 45-I of the RBI Act, 1934
c. Public financial institution under clause 72 of section 2 of the companies act, 2013
d. Such are the institution of the Central government may, by notification, specify as a
financial institution.

15: financial product: means securities, contracts of insurance, deposits, credit

arrangements including loans and advances by banks and financial institutions,
retirement benefit plans, small savings instruments, foreign currency contract or any
other instrument, as may be prescribed.

16. Financial service

a. Accepting of deposits.
B. Safeguarding and administering assets consisting of financial products, belonging to
other person, only agreeing to do so.

c. Effecting contracts of insurance.

d. Offering, managing or agreeing to manage assets consisting of financial products

belonging to the person.

e. Rendering are agreeing, for consideration to render advise on or soliciting for the
purpose of-

1. Buying, selling or subscribing to a financial product

2. availing a financial services

3. Exercising any right associated with a financial product or financial services

F. Establishing or operating an investment scheme.

g. Maintaining or transferring records of ownership of financial product.

H. underwriting the insurance or subscription of financial products.

I. Selling, providing, or issuing stored value or payment instruments or providing

payment services.

18. Financial sector regulator. And authority or body constituted to regulate services
or transactions of financial sector and includes the RBI, SEBI, the IRDA of India, the PF
regulatory authority, and such other regulatory authorities as may be notified by the
Central government.

19. Insolvency professional; a person enrolled under section 206 with an insolvency
professional agency (s. 3 (20)) as its member and registered with the board as an
insolvency professional under section 207 (and performs functions and obligations as
specified under section 208)

No person shall render his service as an insolvency professional, unless he is

enrolled as a member of the insolvency professional agency and registered with the board.
The board may specify the categories of professionals or persons possessing such
qualifications and experience in the field of finance, law, management, insolvency or such
other field as it deems fit.

Section 208: where an insolvency resolution, fresh start, liquidation or bankruptcy

proceeds has been initiated, it shall be the function of an insolvency professional to take
such actions as may be necessary with respect to liquidation of a corporate debtor firm
(ch III part II), individual bankruptcy process (ch IV part III), corporate insolvency
resolution process (ch II partII), individual insolvency resolution process (ch III part III),
fresh start order process (ch II part III).

Every insolvency professional shall abide by the following code of conduct;

a. To take reasonable care and diligence while performing his duties.

B. To comply with all requirements and terms and conditions specified in the bylaws of
the insolvency professional agency of which he is a member.

c. To allow any insolvency professional agency to inspect his records.

d. To submit a copy of the records of every proceeding before the adjudicating authority
to the board as well as to the insolvency professional agency to which he is a member;
and
E. The perform his functions in such manner and subject to such conditions as may be
specified.

Section 23: person: an individual; a HUF; a company; a trust; a partnership; a limited

liability partnership; any other entity established under a statute and includes a person
resident outside India.

Person resident in India shall have the meaning assigned to such term under the Foreign
Exchange Management Act, 1999.

Section 37: miscellaneous definitions: version expressions used, but not defined shall
have the meanings assigned to them under the following acts;

The Indian Contract Act, 1872; The Indian Partnership Act, 1932; The Securities Contract
Regulation Act, 1956; The SEBI Act, 1992; The Recovery Of Debts Due To Banks And
Financial Institutions Act, 1993; The Limited Liability Partnership Act 2008; The
Companies Act, 2013.

Part II - INSOLVENCY RESOLUTION AND LIQUIDATION FOR

CORPORATE PERSONS

This part shall apply to matters relating to the insolvency and liquidation of corporate
debtors, where the minimum amount of default is one lakh rupees.

Definitions

s. 5(5) : corporate applicant means

a) corporate debtor.
b) A member or partner of the corporate debtor who was authorised to make an
application for the corporate insolvency resolution process.
c) An individual who is in charge of managing the operations and resources of the
corporate debtor.
d) A person who has the control and supervision over the financial affairs of the
corporate debtor.

s. 5(6) dispute: includes a suit or arbitration proceedings relating to-

a) the existence of the amount of debt.

b) The quality of goods or servers.
c) The breach of a representation or warranty.

s. 5(8) financial debt: is a debt along with interest, which is disbursed against the
consideration for the time value of money and includes:-

a) money borrowed against the payment of interest.

b) Any amount raised by acceptance under any acceptance credit facility.
c) Any amount raised pursuant to any note purchase facility or the issue of bonds,
notes, debentures, loan stock or any similar instrument.
d) The amount of liability in respect of any leads or hire purchase contract.
 e) Receivables sold or discounted other than any receivables sold on non-recourse
basis.
f) Any amount raised under any other transaction having the commercial effect of a
borrowing.
g) Any derivative transactions entered into in connection with protection against or
benefit from fluctuation in any rate, or prize.
h) Any counter-indemnity obligation in respect of a guarantee, indemnity, bond,
documentary letter of credit or any other instrument issued by a bank or financial
institution.
i) The amount of any liability in respect of any of the guarantee or indemnity for any
of the items referred above.

s. 5(14) insolvency process period: is a period of 180 days, beginning from the
insolvency commencement date and ending on the 180th day.

s. 5(21) operational debt: a claim in respect of the provision of goods or services,

including employment or a debt in respect of the repayment of dues arising under any
law for the time being in force and payable to the government or any local authority.

Chapter 2: CORPORATE INSOLVENCY RESOLUTION PROCESS

s. 6: where any corporate debtor commit default, a financial creditor, an operational

creditor or the corporate debtor itself may initiate corporate insolvency resolution
processes in respect of such corporate debtor.

< additional material >

Chapter 3: VOLUNTARY WINDING OF PROCESSES.

Voluntary Liquidation under IBC 2016

A New Beginning
 The Central Government has, on 30 March 2017, notified, inter alia, Section 59 of
the Insolvency and Bankruptcy Code, 2016 (Code) which deals with voluntary
liquidation of corporate entities with effect from 1 April 2017.
 Now regulation are in place for the voluntary liquidation of a corporate person
under the Code, which includes companies, limited liability partnerships and any
other persons incorporated with limited liability.
In Old Arena
 Prior to the aforesaid notifications, voluntary liquidation was governed by the
provisions of the Companies Act, 1956 (1956 Act) as neither the relevant sections
of the Companies Act, 2013 (2013 Act) nor the Code were in force.
 Further, by virtue of the notification of the Eleventh Schedule of the Code (notified
with effect from 15 November 2016), various winding up provisions of the 2013 Act
had been amended and voluntary winding up sections under the 2013 Act were
omitted.
 Accordingly, under the previous voluntary liquidation regime, the provisions of the
1956 Act continued to apply in relation to voluntary winding up proceedings before
the High Courts.
At present there are 2 types of petition:
1. Proceedings already pending and
2. Those which will be initiated on and after 1 April 2017
Pending voluntary winding up proceedings:
Rule 4 of the Companies (Transfer of Pending Proceedings) Rules, 2016 (Transfer Rules),
which has been notified on 7 December 2016 and brought into force from 1 April 2017,
prescribes that all applications and petitions relating to voluntary winding up of
companies pending before a High Court prior to 1 April 2017, shall continue to be dealt
with by the High Court in accordance with the provisions of the 1956 Act.
Fresh voluntary winding up proceedings to be instituted under the Code :
On combined reading Section 59 of the Code, Sections 434 (1) (c) and 465 of the 2013 Act
and Rule 4 of the Transfer Rules, all fresh proceedings for voluntary winding up on and
from 1 April 2017 shall be instituted before the NCLT and shall be governed as per the
provisions of the Code and the Regulations.

Initiation of the process

As per Section 59 of the Code read with the Regulations, any corporate entity may initiate
a voluntary liquidation proceeding if it satisfies all the following conditions:
1. It has not committed any default;
2. If majority of the directors or designated partners of the corporate person make a
declaration verified by an affidavit to the effect that :
(i) the corporate person has no debt or it will be able to pay its debts in full out of the sale
proceeds of its assets under the proposed liquidation; and
(ii) liquidation is not initiated to defraud any person;
3. Such declaration is accompanied by the audited financial statements and valuation
report of the corporate person;
4. Within 4 (four) weeks of such declaration, a special resolution (an ordinary resolution
would suffice in cases of voluntary liquidation by reason of expiry of its duration or
occurrence of any dissolution event) is passed by the contributories* requiring the
corporate person to be liquidated and appointing an insolvency professional as a
liquidator (Contributories’ Resolution); and
5. Creditor(s) representing two thirds in value of the total debt owed by the corporate
person, approve the Contributories’ Resolution within 7 (seven) days of its passage
(Creditors’ Approval).
* As per the Regulations, a ‘contributory’ means a member of a company, partner of a
limited liability partnership, and any other person liable to contribute towards the assets
of the corporate person in the event of its liquidation.
As per Section 59(4), the company shall notify the ROC and the Board about the
resolution passed under section 59(3) to liquidate the company with seven days of
passing such resolution or subsequent approval by the creditors, as the case may
be.
Liquidation Commencement Date
Subject to the Creditors’ Approval (if required), the voluntary liquidation proceedings in
respect of a corporate person shall be deemed to have commenced from the date of passing
of the Contributories’ Resolution (Liquidation Commencement Date).
On and from the Liquidation Commencement Date, the corporate person shall cease to
carry on its business except as far as required for the beneficial winding up of its business.
Main functions of the Liquidator
To value, sell, recover and realize all assets of and monies due to such corporate persons
in a time bound manner;
Opening a bank account for the purpose of receiving all moneys due to the corporate
person;
Distribution of proceeds to the stakeholders within a period of 6 (six) months of receipt
of the proceeds; and
To preserve a physical or an electronic copy of the reports, registers and books of account
for at least 8 (eight) years after the dissolution of the corporate person, either with himself
or with an information utility
Completion of liquidation
1. Once the affairs of the company have been completely wound up and its assets fully
liquidated, an application shall be made by the liquidator to the NCLT for its dissolution
along with a final report (inter alia consisting of audited liquidation accounts, statement(s)
demonstrating details of the disposed assets and their manner of sale, and statement(s)
that all debt has been discharged and sufficient provision has been made in case of any
adverse outcome of a pending litigation).
2. This final report also needs to be filed with ROC & Board.
3. Pursuant to this application by the liquidator, the NCLT shall pass an order for
dissolution and the entity shall stand dissolved from the date of NCLT’s order.
4. A copy of this order needs to be forwarded with ROC with in 14 days of passing such
order
Formats Prescribed under IBBI (Voluntary Liquidation Process) Regulations, 2017
Schedule 1

Form Name Particulars

Form A Public Announcement

Form B Proof of claim by Operational creditors

except by workmen & employees

Form C Proof of claim by financial creditors

Form D Proof of claim by workmen & employees

Form E Proof of claim by authorised representative

of workmen & employees

Form F Proof of claim by any other stakeholder

As per schedule 2 of Reg. 10, the liquidator shall maintain the following registers
and books as may be applicable, in relation to the liquidation of the corporate
person:
Name of Records

Cash Book;

Ledger;

Bank Ledger;

Register of Fixed Assets and Inventories;

Securities and Investment Register;

Register of Book Debts and Outstanding Debts;

Tenant Ledger;

Suits Register;

Decree Register;

Register of claims and dividends;

Contributories Ledger;

Fee Register;

Suspense Register:

Documents Register;

Books Register;

Register of unclaimed dividends & undistributed properties deposited in

accordance with Regulation 39;

Such other books or registers as may be necessary to account for transactions

entered into by him in relation to the corporate debtor;

Regulation 39: Unclaimed proceeds of liquidation or undistributed assets.

1. Before the order of dissolution is passed under section 59(8), the liquidator shall apply
to the Adjudicating Authority for an order to pay into the Companies Liquidation Account
in the Public Account of India any unclaimed proceeds of liquidation or undistributed
assets or any other balance payable to the stakeholders in his hands on the date of the
order of dissolution.
2. Any liquidator who retains any money which should have been paid by him into the
Companies Liquidation Account under this Regulation shall pay interest on the amount
retained at the rate of twelve per cent per annum, and also pay such penalty as may be
determined by the Board.
3. The liquidator shall, when making any payment referred to in sub-regulation (1),
furnish to the Registrar and the Board, a statement setting forth the nature of the sums
included, the names and last known addresses of the stakeholders entitled to participate
therein, the amount to which each is entitled to and the nature of their claim.
4. The liquidator shall be entitled to a receipt from the Reserve Bank of India for any
money paid to it under sub regulation (2), and such receipt shall be an effectual discharge
of the liquidator in respect thereof.
5. A person claiming to be entitled to any money paid into the Companies Liquidation
Account may apply to the Board for an order for payment of the money claimed; which
may, if satisfied that such person is entitled to the whole or any part of the money claimed,
make an order for the payment to that person of the sum due to him, after taking such
security from him as it may think fit.
6. Any money paid into the Companies Liquidation Account in pursuance of this
Regulation, which remains unclaimed thereafter for a period of fifteen years shall be
transferred to the general revenue account of the Central Government.