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

Meenakshi Exports Ltd's directors made a declaration of solvency on 5 May. The general meeting was held on 10 June, and a special resolution for voluntary liquidation was passed. The company has no creditors. Which statement is correct?

The resolution is out of time. The Code requires the members' special resolution within four weeks of the directors' declaration. Four weeks from 5 May ended on 2 June, so a 10 June resolution is late. Having no creditors only removes the creditor approval step.

  1. AThe resolution is valid because members have two months to pass it
  2. BThe resolution is valid because creditor approval is not needed when there are no debts
  3. CThe resolution is not within the time allowed, because it must be passed within four weeks of the declarationCorrect
  4. DThe resolution is valid only if the declaration is re-verified by the Registrar

Explanation

Under section 59(3)(c), the special resolution must be passed within four weeks of the declaration. Four weeks from 5 May ends on 2 June, so a resolution on 10 June is late. The absence of creditors only removes the creditor approval step; it does not extend the members' time limit.

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