A company can voluntarily liquidate assets under the Insolvency and Bankruptcy Code if it does not have not have any debt, according to rules notified on Friday.
The rules come into effect from April 1, the Insolvency and Bankruptcy Board of India said in a media statement. The process of corporate voluntary liquidation can be initiated by a company by making two declarations:
- That the corporate person does not have any debt, or that it will be able to fully pay its debt from the proceeds of the asset sale under liquidation.
- The person is not defrauding anyone by the liquidation.
The liquidator, an officer appointed for settling all assets, can suspend the process if he finds violation of any of the two conditions, said the statement.
The rules do not allow insolvency professional to act as a liquidator if he is not independent of the person liquidating assets.
The Insolvency and Bankruptcy Code, notified by the government in May last year, seeks to consolidate and amend laws relating to re-organisation as well as insolvency resolution of companies, partnership firms and individuals in a time-bound manner.
Also Read: Insolvency Board Lays Down ‘Fit And Proper' Criteria
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