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CS Professional · Corporate Restructuring, Valuation and Insolvency · Voluntary Liquidation

Directors of Ganga Traders Ltd file a declaration for voluntary liquidation, but investigation shows the purpose was to avoid paying a supplier. Under the Code, what consequence may follow?

If voluntary liquidation is initiated with intent to defraud any person, the Adjudicating Authority may impose a penalty of at least one lakh rupees and up to one crore rupees on the person who initiated it.

  1. AThe Adjudicating Authority may impose a penalty of not less than one lakh rupees, extending to one crore rupeesCorrect
  2. BThe directors are automatically imprisoned for ten years
  3. CA penalty of up to Rs 10,000 only may be imposed by the Registrar
  4. DNo consequence arises if the special resolution was passed

Explanation

Section 65(2) provides that a person initiating voluntary liquidation with intent to defraud may be penalised by the Adjudicating Authority, not less than Rs 1 lakh and up to Rs 1 crore. Passing the resolution gives no protection.

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