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

Kaveri Polymers Ltd, which owes debts to banks, files a directors' declaration on 1 March for voluntary liquidation. The members pass a special resolution appointing an insolvency professional as liquidator on 20 March. Creditors representing two-thirds in value of its debt approve the resolution on 25 March. Which statement is correct?

Both timelines are met. The special resolution came within four weeks of the declaration, and creditors holding two-thirds in value of debt approved it within seven days of the resolution. Because the company owes debt, creditor approval is mandatory even though the directors declared solvency.

  1. AThe resolution was passed within four weeks of the declaration, and the creditor approval came within seven days of the resolution, so the requirements are metCorrect
  2. BThe resolution is invalid because creditor approval must precede the members' resolution
  3. CThe creditor approval is late because it was required within four weeks of the declaration
  4. DCreditor approval is unnecessary because the directors have declared solvency

Explanation

Section 59(3)(c) requires the special resolution within four weeks of the declaration; 1 to 20 March is within that. The proviso requires approval by creditors holding two-thirds in value of debt within seven days of the resolution; 20 to 25 March is five days. Since the company owes debt, creditor approval is mandatory despite the solvency declaration.

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