CORPORATE LIQUIDATION ACCOUNT

[Mr. M. GOVINDARAJAN]

Liquidation proceedings

The Adjudicating Authority, if it is satisfied that no resolution plan has been received in the corporate insolvency resolution process or in the fast track corporate insolvency resolution process or rejected the resolution plan for non compliance of the requirements under the Code, shall pass an order requiring the corporate debtor to be liquidated.

Chapter III of the Insolvency and Bankruptcy Code, 2016 (‘Code’ for short) provides with the procedure for the liquidation of a corporate debtor.  For this purpose the Board also made IBBI (Liquidation Process) Regulations, 2016.

Regulation 46 provides that before the order of dissolution is passed, the liquidator shall apply to the Adjudicating Authority for an order to pay into the Companies Liquidation Account in the Public Account of India-

• any unclaimed proceeds of liquidation; or
•  undistributed assets; or
•  any other balance payable to the stakeholders in his hands on the date of the order of dissolution.   

Any liquidator who retains any money which should have been paid by him into the Companies Liquidation Account under this Regulation shall pay interest on the amount retained at the rate of 12% per annum, and also pay such penalty as may be determined by the Board.

Amendment to Liquidation Regulations

IBBI made an amendment to the Liquidation regulations vide Notification No. IBBI/2019-20/GN/REG053, dated 06.01.2020.

Corporation Liquidation Account

The amendment proposed that the Board shall operate and maintain an Account to be called the Corporate Liquidation Account in the Public Accounts of India.

Deposit of amount

A liquidator, who holds any amount of unclaimed dividends or undistributed proceeds in a liquidation process on the date of commencement of Regulations, shall deposit the same within 15 days of the date of such commencement, along with any income earned thereon till the date of deposit.  If the liquidator fails to deposit the said amount he is liable to pay interest @ 12% from the due date to the date of deposit.  The liquidator shall be entitled to a receipt from the Board for any amount deposited into the Corporate Liquidation Account under this regulation.

Submission of report

 A liquidator shall submit to-

• the Authority with which the corporate debtor is registered; and
• the Board,

the evidence of deposit of the amount into the Corporate Liquidation Account under this regulation along with a  statement in Form-I setting forth the nature of the amount deposited into the Corporate Liquidation Account, and the names and last known addresses of the stakeholders entitled to receive the unclaimed dividends or undistributed proceeds.

Form I

The liquidator is to submit Form I (Deposit of Unclaimed Dividends and / or Undistributed Proceeds) as discussed above.  The following details are to be provided in the said form-

• Name of the Corporate Debtor;
• Identification Number of CD (CIN/DIN)
• CIRP Commencement Date;
• Liquidation Commencement Date;
• Date of Deposit into the Corporate Liquidation Account;
• Amount deposited into the Corporate Liquidation Account ;
• Bank Account from which the amount is transferred to Corporate Liquidation Account;
• Details of the Amount (Rs.) deposited into Corporate Liquidation Account-

• Unclaimed dividends;
•  Undistributed proceeds;
•  Income earned till the due date of deposit;
• Interest at the rate of twelve per cent on the amount retained beyond due date 

• Details of Stakeholders entitled to Unclaimed Dividends or Undistributed Proceeds-

• Name of stakeholder entitled to receive unclaimed dividends or undistributed proceeds;
• Address, phone number and email address of the stakeholder;
• Identification Number of the stakeholder (PAN, CIN, Aadhar No.);
• Amount due to the stakeholder;
• Nature of Amount due;
• Remarks, if any.

Register

The liquidator, for the purpose of this regulation, shall maintain Register of unclaimed dividends and undistributed proceeds.

Claim by the stakeholder

A stakeholder, who claims to be entitled to any amount deposited into the Corporate Liquidation Account, may apply to the Board in Form J for an order for withdrawal of the amount.   If any other person other than the stakeholder claims to be entitled to any amount deposited into the Corporate Liquidation Account, he shall submit evidence to satisfy the Board that he is so entitled.

The Board may, if satisfied that the stakeholder or any other person is entitled to withdrawal of any amount from the Corporate Liquidation Account, make an order for the same in favor of that stakeholder or that other person.

Form J

The stakeholder, whose amount is transferred to Corporate Liquidation Account, may apply for the refund of the said amount in Form J to the Board.  The following information is to be furnished in the said form by the said stakeholder-

• Name of the Corporate Debtor;
• Identification Number of Corporate Debtor (CIN/DIN);
• CIRP Commencement Date;
• Liquidation Commencement Date;
• Date of Dissolution Order;
• Date of Deposit into the Corporate Liquidation Account;
• Name of the Stakeholder seeking withdrawal;
• Identification Number of the Stakeholder ( PAN,  CIN, Aadhaar No.)
• Address and Email Address of Stakeholder;
• Amount of Claim of the Stakeholder, admitted by the Liquidator;
• Amount of unclaimed dividends / undistributed proceeds deposited by the liquidator in the Corporate Liquidation  Account against the stakeholder;
• Amount of unclaimed dividends / undistributed proceeds the Stakeholder seeks to withdraw from the Corporate Liquidation Account;
• Bank Account to which the amount is to be transferred from the Corporate Liquidation Account, if withdrawal is approved
• Reasons for not taking dividend or proceeds during the Liquidation Process;
• Any legal disability in applying for withdrawal?
• If yes details should be provided.

Ledger

The Board shall maintain a corporate debtor-wise ledger of the amount deposited into and the amount withdrawn from the Corporate Liquidation Account under this regulation.

Form H

The liquidator is required to file Form H before the Adjudicating Authority.  The amendment requires further particulars in Form H in respect of deposit of amount in Corporate Liquidation Account as detailed below-

• Date of deposit of unclaimed dividends or undistributed proceeds and income and interest thereon, if any;
• Amount deposited into Corporate Liquidation Account-

• Amount of unclaimed dividends;
• Amount of undistributed proceeds;
•  Income;
• Interest .

• Date of submission to the Board and the Authority.

Custodian

The Board shall nominate an officer of the level of Executive Director of the Board as the custodian of the Corporate Liquidation Account and no proceeds shall be withdrawn without his approval.

Audit

The Board shall maintain proper accounts of the Corporate Liquidation Account and get the same audited annually.  The audit report along with the statement of accounts of the Corporate Liquidation Account shall be placed before the Governing Board and shall be forwarded to the Central Government.

Transfer of unclaimed amount

Any amount deposited into the Corporate Liquidation Account in pursuance of this regulation, which remains unclaimed or undistributed for a period of fifteen years from the date of order of dissolution of the corporate debtor and any amount of income or interest received or earned in the Corporate Liquidation Account shall be transferred to the Consolidated Fund of India.

Separate bank account

Until the Corporate Liquidation Account is operated as part of the Public Accounts of India, the Board shall open a separate bank account with a scheduled bank for the purposes of this regulation.

Corporate Voluntary Liquidation Account

The Board also amended the IBBI (Voluntary Liquidation Process) Regulations, 2017 in line with the liquidation process regulations vide Notification No. IBBI/2019-20/GN/REG054, dated 15.01.2020.

These regulations required that the Board shall operate and maintain an Account to be called the Corporate Voluntary Liquidation Account in the Public Accounts of India.  The provisions relating to Corporate Liquidation Account and Corporate Voluntary Liquidation Accounts are more or less same except the following-

• The liquidator under voluntary liquidation shall file Form G as to the deposit of dividends and/or undistributed proceeds to the Board. 
• Form H is prescribed for the stakeholders to claim the amount from the corporate voluntary liquidation account which has been deposited by the liquidator.