Skip to content

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

Rajan Textiles Ltd is in liquidation. Its balance sheet shows 100% shares held in a wholly owned subsidiary, Rajan Dyes Pvt Ltd, which owns a factory in Surat. The liquidator wants to know what forms part of the liquidation estate. Which position is correct?

The shares in the subsidiary are part of the liquidation estate because the Code expressly lists shares held in a subsidiary. The subsidiary's own assets, such as its factory, are expressly excluded, since they belong to a separate entity and are not assets of the corporate debtor.

  1. AThe shares held in the subsidiary form part of the liquidation estate, but the factory owned by the subsidiary does notCorrect
  2. BBoth the subsidiary's shares and the subsidiary's factory form part of the liquidation estate
  3. CNeither the shares nor the factory form part of the liquidation estate
  4. DOnly the factory forms part of the liquidation estate, since it is a tangible immovable asset

Explanation

Section 36(3) includes shares held in any subsidiary of the corporate debtor in the liquidation estate. Section 36(4)(d) excludes assets of any Indian or foreign subsidiary. The factory belongs to the subsidiary, so only the shares are part of the estate. The option including both ignores the exclusion.

Did you get it right without looking?

One question tells you little. A timed set on Liquidation of Corporate Person shows your real accuracy, how long you take and where you lose marks.

Practise Liquidation of Corporate PersonFree diagnostic mock

More Liquidation of Corporate Person questions