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CS Professional · Corporate Restructuring, Valuation and Insolvency · Liquidation on or after Failing of Resolution Plan

Sunrise Textiles Pvt Ltd, which has not committed any default, wants to start voluntary liquidation under the IBC. Its directors have made a full inquiry into its affairs. Which statement must the declaration by the directors contain?

The directors' declaration must state that they have made full inquiry and believe the company has no debt or can pay all debts in full from asset sale proceeds, and that liquidation is not meant to defraud anyone. It is verified by affidavit and made by a majority of directors.

  1. AThat the company has formed an opinion that it will be able to pay its debts in full from asset sale proceeds, or has no debt, and is not being liquidated to defraud any personCorrect
  2. BThat the company has defaulted on at least one financial debt and cannot continue
  3. CThat the company's creditors have already approved the liquidation by two-thirds in value
  4. DThat the Adjudicating Authority has admitted the company for liquidation

Explanation

Under section 59(3)(a), a majority of the directors must declare, verified by affidavit, that they inquired into the affairs and believe the company has no debt or can pay its debts in full from asset sale proceeds, and that it is not being liquidated to defraud anyone. Default is a bar to voluntary liquidation, so the option citing default is wrong. Creditor approval comes later, after the members' resolution.

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