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

Kaveri Polymers Pvt Ltd begins voluntary liquidation and appoints IP Neha Sethi as liquidator. Before her appointment, the directors and key managerial personnel ran the company's affairs. What is the position of their powers once the liquidator is appointed, as applied to this process?

Once the liquidator is appointed, the powers of the board and key managerial personnel cease to have effect and are vested in the liquidator. They do not continue with countersignature or pass to members, because the Code transfers these powers wholly to the liquidator.

  1. ATheir powers cease to have effect and vest in the liquidatorCorrect
  2. BTheir powers continue but need the liquidator's countersignature
  3. CTheir powers are suspended only for asset sales
  4. DTheir powers pass to the members in general meeting

Explanation

Section 34(2) provides that on appointment of a liquidator all powers of the board of directors, key managerial personnel and partners cease to have effect and vest in the liquidator. Sections 35 to 53 apply to voluntary liquidation with necessary modifications. Continuing powers with countersignature is not what the text says.

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