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CS Professional · Insolvency and Bankruptcy - Law and Practice · Liquidation of Corporate Person

After liquidation of Vindhya Steels Pvt Ltd begins, the liquidator is appointed. The managing director, Mr. Rakesh Bhatia, says the board still has authority to sign bank mandates and sell stock. Which statement is correct?

All powers of the board of directors and key managerial personnel cease and vest in the liquidator once he is appointed. Section 34(2) makes no distinction by asset type or value, so the managing director cannot sign bank mandates or sell stock.

  1. AThe board keeps power over movable assets while the liquidator handles immovable assets only
  2. BThe board keeps power until the first creditors' distribution is made
  3. CAll powers of the board of directors and key managerial personnel cease and vest in the liquidatorCorrect
  4. DThe powers pass to the liquidator only for assets above the value fixed by the Adjudicating Authority

Explanation

Section 34(2) provides that on appointment of the liquidator, all powers of the board of directors, key managerial personnel and partners cease to have effect and vest in the liquidator. There is no split by asset type or by timing of distribution, so the MD's claim fails.

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