THE INSOLVENCY AND BANKRUPTCY CODE (AMENDMENT) ACT, 2026 - PART VIII -(VOLUNTARY LIQUIDATION)

Voluntary liquidation

Section 59 of the Code provides the provisions for voluntary liquidation.  The Act made amendments to this section.  After incorporating the said amendments Section 59(2) of the Code will provide that the voluntary liquidation of a corporate person shall meet such conditions and procedural requirements, and be completed within such period which shall not be more than one year, as may be specified.

Section 59(4) of the Code provides that the company shall inform (‘notify’ before amendment) the Registrar of Companies and the Board about the resolution under sub-section (3) to liquidate the company within seven days of such resolution or the subsequent approval by the creditors, as the case may be.

Termination of voluntary liquidation

The Act inserted new sections viz., 59(5A). 59(5B) and 59 (5C).  The newly inserted Section 59(5A) provides that any time after the commencement of a voluntary liquidation proceeding but before an application under sub-section (7) (application to Adjudicating Authority for the dissolution) is filed, the voluntary liquidation proceeding shall be terminated if the following conditions are satisfied, namely-

1. the members of the company have passed a special resolution for terminating the voluntary liquidation proceeding;
2. where the company owes debt to any person on the date of the resolution under clause (a), creditors representing two-thirds in value of such debt have approved the resolution passed under clause (a) within a period of 7 days of such resolution; and
3. such other conditions as may be specified.

The newly inserted Section 59(5B) provides that theliquidator shall intimate the Board and the Registrar of Companies regarding the special resolution under clause (a) of sub-section (5A) within a period of 7 days of passing the resolution or subsequent approval of the creditors under clause (b) thereof, as the case may be.

The newly inserted section 59(5C) provides that a voluntary liquidation proceeding shall be deemed to have been terminated from the date on which the liquidator intimates the Registrar of Companies under sub-section (5B), and such termination shall bring the term of the liquidator to an end and have such other consequences as may be specified.

Section 59(6), after incorporating the amendment will provide that the provisions of clause (b) of section 18 of Chapter II, 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.

Amendment to Regulations

The Board, for the purposes of processing the voluntary liquidation, made IBBI (Voluntary Liquidation) Regulations, 2017.  Now the Board proposed to amend the regulations for voluntary liquidation. 

The amendment proposed to omit Schedule I to this regulation and the Schedule II to be renumbered as Schedule I. 

Regulation 10 provides for the maintenance of registers and book of accounts.  The amended Regulation 10(3), after incorporating the amendment provides that the registers and books may be maintained in the forms indicated in Schedule I, with such modifications as the liquidator may deem fit in the facts and circumstances of the liquidation.

Regulation 12 provides for the liquidator to consult with the stakeholders.  After incorporating the amendment Regulation, the marginal heading shall be read as ‘assistance by stakeholders’ instead of the existing ‘Consultation with stakeholders.   Regulation 12(1) will read as ‘The stakeholders shall extend all assistance and cooperation to the liquidator to complete the liquidation of the corporate person.’

The Regulations prescribes the following forms-

• Form A of Schedule I – Regulation 14(1);
• Form B of Schedule I-Regulation 16 (1);
• Form C of Schedule I – Regulation 17 (1);
• Form D of Schedule I – Regulation 18 (1);
• Form E of Schedule I – Regulation 18 (2);
• Form F of Schedule I – Regulation 19(1).

The amendment substituted the words ‘“such form as notified by the Board through circular” for the above said forms in respective regulation.

Regulation 29 provides for verification of claims. After incorporating the amendments, the Regulation 29(1) provides that the liquidator shall verify the claims submitted within 30 days from the last date for receipt of claims and may either admit or reject the claim, in whole or in part, as the case may be. 

Provided that where the liquidator rejects a claim, he shall record in writing the reasons for such rejection.

Regulation 29(2) provides that that the liquidator shall communicate his decision of admission or rejection of claims to the stakeholder within seven days of such admission or rejection of claims.

Regulation 29(3) provides that a creditor may approach the Adjudicating Authority against the decision of the liquidator.

Regulation 38(3), after incorporating the amendments will provide that the liquidator shall submit the Final Report and the compliance certificate in such form as notified by the Board through the circular along with the application under sub-section (7) of section 59 to the Adjudicating Authority.

Regulation 39 provides for the opening and maintaining of Corporate voluntary liquidation account.  Regulation 39(5) and Regulation 39(7) and (7D) prescribed forms Form G and Form I respectively.  The amendment substituted the words ‘such form as notified by the Board through the circular’ are substituted for ‘Form G’ and ‘Form I’.

The amendment inserted a new section 42 which read as below-

42. Termination of Voluntary Proceedings

(1) The resolution referred to in clause (a) of sub-section (5A) of section 59, shall provide for-

            (a) rationale for termination of voluntary liquidation proceedings;

            (b) treatment of liquidation costs; and

            (c)  a declaration that the termination will not result in prejudicially affecting the interest of any stakeholder. 

(2) For the purposes of clause (c) of sub-section (5A) of section 59, the liquidator shall intimate the Adjudicating Authority, along with a report in such form as notified by the Board through circular, regarding termination of voluntary liquidation proceedings, along with a statement that  – 

(a) due process for termination of voluntary liquidation proceedings has been followed; and

(b) the termination of voluntary liquidation proceedings is not initiated to defraud any person and the corporate person is solvent.

(3) Where the conditions specified under clause (a), (b) and (c) of sub-section (5A) of section 59 are satisfied, the liquidator shall, within seven days of the passing of the special resolution under clause (a) thereof or the approval of creditors under clause (b) thereof, as the case may be, intimate the Board and the Registrar of Companies along-with the report prepared under sub-regulation (2), regarding termination of the voluntary liquidation proceedings.

(4) Upon termination of the voluntary liquidation proceedings under sub-section (5C) of section 59 of the Code—

 (a) the appointment and term of the liquidator shall stand terminated;

 (b) the liquidator shall cease to exercise any powers or functions under these regulations; and

(c) no further action shall be taken under these regulations in respect of the voluntary liquidation proceedings. 

New Forms           

The amendment inserted the following new forms to be filed during the course of liquidation proceedings-

1. Form J – Intimation for termination of voluntary liquidation proceedings under Regulation 42;
2. Form H – Compliance certificate to be filed under Regulation 38(3);