Page 182 - economic_survey_2021-2022

156 Economic Survey 2021-22

Step 2: Passing of shareholder’s resolution and appointing a liquidator. There shall be a resolution (or
special resolution) of the members of the company in a general meeting requiring the company to be
liquidated voluntarily and appointing an insolvency professional to act as the liquidator. The creditors
representing two-thirds in value of the debt of the company shall approve the said resolution within
seven days of such resolution.

Step 3: Liquidator files the resolution to Insolvency and Bankruptcy Board of India (IBBI) and RoC
within seven days as per section 59(4) of the Code and regulation 3 (2) of Voluntary Liquidation
Regulations. Regulation 14 of Voluntary Liquidation Regulations requires making public announcement
(in English and Regional Newspapers) within 5 days calling stakeholders to submit claims within 30
days (Section 38 (1) of the Code).

Step 4: Opening a designated bank account for cash and liquid funds and closure of existing bank
account(s) and transfer of funds to a designated bank account.

Step 5: Apply for No Objection Certificate (NOC) in Central Board of Direct Taxes, Central Board
of Indirect Taxes and Custom, Employee Provident Fund Organisation and sectoral regulators ( These
NOCs are not explicitly mentioned in IBC but are implied to be taken).

Step 6: Liquidator gives final remittance to shareholders. Also, the liquidator deposits applicable
withholding taxes and then closes the bank account opened for liquidation.
Step 7: Liquidator then submits a final report to shareholders, RoC, IBBI and National Company Law
Tribunal (NCLT).
Step 8: Order is passed by NCLT.
Step 9: File copy of the order for dissolution of corporate debtor with RoC vide Form INC 28 and RoC
to strike-off the name of Corporate Debtor from RoC.

The first key issue in the process is delays in obtaining No Objection Certificates (NOCs) from departments
including Central Board of Direct Taxes, Central Board of Indirect Taxes and Custom, Employee Provident
Fund Organisation and other sectoral regulators. The NOCs are implied to be taken although not specifically
mentioned in the Code. This leads to confusion regarding the procedure to be followed among the departments,
liquidators etc. with regard to the exact procedure to be followed. Another issue in the process is that there
are no well-defined Standard Operating Procedures (SoPs) in the departments for granting NOC. As per
the current practice, the liquidators write a letter to the head of the departments asking for any claims that
the department has on the company and to grant NOC. The department then assesses the application and
responds. Since there are no SoPs, the claims raised by the departments come with a lag and are not within
the stipulated period. Further, another problem leading to delays in certain cases is that there are no standard
guidelines on requirements by NCLT bench, creating lags in the processes as the company has to contact
various departments to take the specified clearances as required by NCLT. Another issue is the hesitancy in
the banks for closure of existing bank accounts and also for the opening of the new liquidation bank account
by the liquidator, which is a mandatory step in the liquidation proceedings.

To sum up, there is a case for simplifying the problems in the Voluntary Liquidation process, to improve
ease of exit for business. Apart from simplifying the issues in the various steps in the processes, there
is a need for the creation of a single window for the entire process. A portal that combines all the
steps of the liquidation process altogether, starting from application by companies to processing by all
departments will prove to be very useful.