The Insolvency and Bankruptcy Board of India has mandated liquidators to transfer unclaimed dividends or proceeds generated during a voluntary insolvency process into a designated account before applying for dissolution of the company.
As per the amendment to voluntary liquidation regulations, the designated account will be operated by the bankruptcy regulator. Failure by the liquidator to deposit dividend or proceeds generated during the voluntary liquidation process will attract interest at the rate of 12 percent per annum.
Companies seeking to discontinue operations can voluntarily apply for liquidation under section 59 of the Insolvency Code after obtaining prior approval of the board of directors and shareholders. Once the company is liquidated, a liquidator approaches the National Company Law Tribunal for its dissolution, when a company ceases to exist after the tribunal's approval.
Here are the key changes introduced by the amendment.
Mandatory Transfer Of Dividend By Liquidator
As per the amended regulations, the dedicated insolvency regulator will set up and operate a “Corporate Voluntary Liquidation Account”. Liquidator of a company undergoing voluntary liquidation must transfer any:
- Unclaimed dividends.
- Undistributed proceeds.
- Income earned till the date of deposit to the account operated by the dedicated bankruptcy regulator.
Liquidators must provide details in a specified format about the nature of amount being transferred along with details of the persons in their records who were entitled to receive the unclaimed amounts.
How Can Stakeholders Claim Unclaimed Amounts?
Another important change deals with the manner in which a stakeholder can approach the insolvency regulator for claiming any unclaimed dividend or amount lying in the corporate voluntary liquidation account.
Stakeholders, as per the amendment, must give reasons for not claiming the dividend during the voluntary liquidation process and provide details like quantum of the unclaimed amount in a format specified by the bankruptcy board.
Stakeholders cannot make any claim if an amount lies unclaimed in the designated account for a period of fifteen years from the dissolution of the company.
The notification will come into effect after publication in the official gazette.
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