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

Sunrise Textiles Pvt Ltd, which has not committed any default, wants to start voluntary liquidation under the Code. Its directors have made a full inquiry into the company's affairs. Which step must be taken first for the proceedings to meet the statutory conditions in Section 59(3)?

The first step is a declaration by a majority of the directors, verified by an affidavit, stating that they have inquired into the company's affairs, that it has no debt or can pay in full from asset proceeds, and that it is not being liquidated to defraud anyone.

  1. AA declaration from a majority of the directors, verified by an affidavit, that the company has no debt or can pay its debts in full from asset sale proceeds, and is not being liquidated to defraud anyoneCorrect
  2. BA petition to the Adjudicating Authority seeking an order of liquidation
  3. CA resolution of the creditors appointing the liquidator before any member meeting
  4. DA report from the Registrar of Companies certifying that the company has no debt

Explanation

Section 59(3)(a) requires a declaration from a majority of directors, verified by an affidavit, covering solvency and absence of intent to defraud. The members' special resolution follows within four weeks of this declaration. No prior petition to the Adjudicating Authority or Registrar certificate is required.

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