Skip to content

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

Rohit Steels Ltd began voluntary liquidation with a solvency declaration. Later it emerged that the directors' real purpose was to avoid paying a supplier who had a pending claim. Which statement best reflects the Code?

Initiating voluntary liquidation with intent to defraud attracts a penalty from the Adjudicating Authority of not less than one lakh rupees and up to one crore rupees. The directors' declaration must state the company is not being liquidated to defraud anyone, so the purpose here breaches it.

  1. ANo consequence arises, since the declaration was filed before the claim was decided
  2. BThe liquidator alone is liable, since the directors' declaration is only a formality
  3. CThe Adjudicating Authority may impose a penalty of not less than one lakh rupees, extending to one crore rupees, on the person who initiated voluntary liquidation with intent to defraudCorrect
  4. DThe penalty is fixed at one crore rupees in every case of intent to defraud

Explanation

Section 59(3)(a)(ii) requires the declaration that the company is not being liquidated to defraud any person. Section 65(2) lets the Adjudicating Authority penalise anyone initiating voluntary liquidation with intent to defraud, with a penalty of at least one lakh and up to one crore rupees. The amount is a range, not a fixed sum.

Did you get it right without looking?

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

Practise Voluntary Liquidation of CompaniesFree diagnostic mock

More Voluntary Liquidation of Companies questions