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

Sagar Textiles Pvt Ltd, a company that has never defaulted on any debt, wants to start voluntary liquidation under the IBC. Its board has five directors. Three of them sign the declaration verified by an affidavit, while two refuse to sign. Is the declaration requirement met?

The requirement is met. The Code asks for a declaration from a majority of the directors, verified by an affidavit. Three out of five directors form a majority, so unanimity or two-thirds is not needed and shareholding of the signatories is irrelevant.

  1. ANo, because every director must sign the declaration
  2. BNo, because at least two-thirds of the directors must sign
  3. CYes, because a declaration from a majority of the directors, verified by an affidavit, is what the Code requiresCorrect
  4. DYes, but only if the signing directors are also shareholders

Explanation

Section 59(3)(a) requires a declaration from a majority of the directors, verified by an affidavit. Three of five is a majority. The Code does not require unanimity or a two-thirds share, so those options are wrong.

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