Voluntary Liquidation pursuant to section 59(7) of IBC, 2016-Solvent Company Voluntary liquidation is a process of winding up voluntarily without the Court / NCLT intervention. Members of the Company and Creditors, if an

CS Professional · Insolvency - Law and Practice · PYQS · June 2025
Voluntary Liquidation pursuant to section 59(7) of IBC, 2016-Solvent Company Voluntary liquidation is a process of winding up voluntarily without the Court / NCLT intervention. Members of the Company and Creditors, if any, will appoint a liquidator to liquidate all assets and pay to all its creditors. Surplus amount, if any, after meeting all costs and expenses shall be distributed to the members as per the mechanism provided in Section 53 of IBC, 2016. Voluntary liquidation process has to be completed as per Insolvency and Bankruptcy Board of India (Voluntary Liquidation Process) Regulations, 2017. With amendment to IBBI regulations for voluntary liquidation dated 31.1.2024, the process for voluntary liquidation has become more transparent, efficient and faster. These amendments have also brought some additional safeguards to protect interest of stakeholders. Based on the above facts answer the following Questions: What effects do Voluntary Liquidation Procedures have on Existing Contracts ?

Answer & Explanation:

For the purposes of liquidation, the liquidator forms an estate of the assets and holds the liquidation estate as a fiduciary for the benefit of all the creditors. The liquidation estate assets include the contractual rights of the Company as well. If any contractual liability is there, it needs to be exited either before commencement of liquidation by the then management of the company and such liability shall be made as part of Declaration of Solvency (DoS). If there is a requirement of goods or services under such contract during the liquidation for the beneficial liquidation, the liability for such future payments should also be covered under DoS. All other contracts come to end on commencement of liquidation.

Topics: Voluntary Liquidation

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