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

Meghdoot Foods Ltd owes debts to creditors. Its members pass the special resolution for voluntary liquidation on 10 April. Under Section 59 IBC, what must happen next?

Creditors holding two-thirds in value of the company's debt must approve the members' resolution within seven days of its passing. Without this approval, the voluntary liquidation does not proceed where the company owes debt.

  1. ACreditors representing two-thirds in value of the debt must approve the resolution within seven days of the resolutionCorrect
  2. BCreditors representing three-fourths in value of the debt must approve the resolution within thirty days
  3. CCreditors representing a simple majority in number must approve the resolution within fourteen days
  4. DNo creditor approval is needed once members pass a special resolution

Explanation

The proviso to Section 59(3)(c) provides that where the company owes any debt, creditors representing two-thirds in value of the debt must approve the resolution within seven days of the resolution. Here that means by 17 April. The other options use wrong thresholds or periods.

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