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CS Professional · Insolvency and Bankruptcy - Law and Practice · Voluntary Liquidation of Companies

Directors of Narmada Foods Ltd, which has no default, made a declaration on 1 June for voluntary liquidation. The company owes debts to creditors. Members pass a special resolution appointing an insolvency professional as liquidator on 20 June. What is the latest time within which creditors representing two-thirds in value of debt must approve this resolution?

Creditors must approve by 27 June. Where the company owes debt, creditors representing two-thirds in value must approve the members' resolution within seven days of that resolution, and 20 June plus seven days gives 27 June. The four-week limit governs the members' resolution only.

  1. AWithin seven days of the resolution, that is by 27 JuneCorrect
  2. BWithin four weeks of the declaration, that is by 29 June
  3. CWithin fourteen days of the resolution, that is by 4 July
  4. DWithin thirty days of the resolution, that is by 20 July

Explanation

The proviso to section 59(3)(c) requires creditors representing two-thirds in value of the debt to approve within seven days of the members' resolution. 20 June plus seven days is 27 June. The four-week period applies to the members' resolution after the declaration, not to creditor approval.

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