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154 Economic Survey 2021-22

4.65 The informality at the pre-initiation stage offers flexibility for the CD and its creditors
to swiftly explore and negotiate the best way to resolve stress in the business, while the post-
initiation stage drives value maximisation and bestows the resolution plan with statutory
protection. The process is required to be completed within a time frame of 120 days from the
commencement date. During the PPIRP, the management of the affairs of the CD shall continue
to vest in the Board of Directors / partners of the CD and the resolution professional conducts
the process under the guidance and oversight of the creditors.

Box 6: VOLUNTARY LIQUIDATION OF CORPORATES

Liquidation can be involuntary as in the case of insolvency or bankruptcy; or voluntary which could be due
to personal reasons, subsidiaries being merged etc. A company may decide to voluntarily close its operation
even when it’s viable. There has been an overhaul in the process of winding-up due to the insolvency/
bankruptcy with the introduction of the Insolvency and Bankruptcy Code, 2016 (IBC). However, the
procedure of voluntary exit of business still needs to be simplified significantly, on top of recent progress.

Currently, there are two main methods of voluntary liquidation, one is through the Registrar of
Companies (RoC) under section 248 of the Companies Act, 2013 and other is under the IBC. The
former is currently the more popular route by far.

i. Section 248(2) of Companies Act 2013

Under Section 248(2) of the Companies Act, a company may, after extinguishing all its liabilities, by
a special resolution or consent of 75 per cent members in terms of paid-up share capital, may file an
application in a prescribed manner to the Registrar of Companies (RoC). There must not be any pending
litigations against the company. The following is the step-by-step procedure:
Step 1: Company has to convene a board meeting to approve the closure of the bank account, pay off
all the pending liabilities, and prepare the latest financial statement of the Company after the closure of
the bank account.

Step 2: Company files a STK-2 form with the respective RoC.

Step 3: Director shall furnish a declaration in the e-form stating that the company does not have any
dues towards any government department (Centre, State, Statutory or local authorities). This has to be
certified by a Charted Accountant, Cost Account or Company Secretary.
Step 4: RoC issues a public notice in a prescribed manner on Ministry of Corporate Affairs (MCA)
website; Official Gazette and the largest circulating newspaper, one in English and the other one in
vernacular language. A 30 days’ notice time is provided for any claims and objections to be raised. If
the company applying for winding up is regulated under Special Act (under section 8), approval of the
concerned Regulatory body is required, otherwise it is not required .
8
Step 5: After expiry of notice period, RoC may strike off companies name and publish dissolution
notice in Official Gazette.

8 Companies which have been incorporated for carrying on business objects like, NBFC, Asset Management Companies, Insurance etc. have
to obtain NOC from their Regulatory authority like RBI, SEBI, IRDA respectively.