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Preliminary Report: Voluntary Liquidation
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Preliminary Report under Voluntary Liquidation
Statutory reference to the Preliminary Report: Regulation 8(1)(a) and Regulation 9 of the IBBI (Voluntary Liquidation Process) Regulations, 2017 contain references to the Preliminary Report.
Timeline of Preliminary Report: It is to be submitted within 45 days of the voluntary liquidation commencement date. That is to say, if voluntary liquidation commencement date is "T", Preliminary Report is to be submitted within T+45 days.
Who has to submit: The Liquidator of the Company/Corporate Person has to prepare and submit the Preliminary Report.
To whom it is to be submitted: The Preliminary Report is to be submitted to the Corporate Person. In my view, it can be addressed to the Board of Directors. Unlike CIRP or Liquidation, the Board of Directors is not suspended during voluntary liquidation. Hence, it is a sufficient compliance if the Preliminary Report is addressed to and submitted to the Board of Directors.
Submission to the Regulator and IPA: Under IP login of the Insolvency and Bankruptcy Board of India (IBBI) website, there is no provision to upload the Preliminary Report, as of now. Hence, this can be mailed to
Contents of the Preliminary Report:
Capital Structure: In case of Company, mention the authorised capital, issued, subscribed, and paid up capital in amount as well as the No. of shares. In case of LLP, mention has to be made of the Capital contribution of every partner.
Estimate of Assets and Liabilities as on the voluntary liquidation commencement date: First, obtain the provisional financial statements linked with trial balance duly authenticated by the management of the company as on the voluntary liquidation commencement date. For the assets so identified, valuation has to be made by the valuers registered with IBBI. It is better to check the credentials of the valuers in IBBI website before giving them the assignment. The valuation can be made separately for Land and Building, Plant & Machinery and Financial Assets. In my opinion, liquidation value has to be taken as the estimated realisable value of assets. IBBI has amended the liquidation process regulations recently to say that assets which are not readily realisable can be assigned. This can be applied to voluntary liquidation also and the Liquidator has to be alert to assign such assets so that voluntary liquidation can be completed at the earliest. In case of liabilities, it is better to adopt the values as per books as on the liquidation commencement date. In case books of the corporate person are not reliable in the opinion of the liquidator, he has to record the same in writing and provide his best estimate.
Enquiry into certain matters: The Liquidator has to record reasons for or against undertaking further enquiry into certain matters. These matters relate to the promotion/formation of the corporate person, failure of the corporate person or conduct of the business of the corporate person.
Proposed plan of action for liquidation: This includes many things including the timelines.
Timelines: There are certain statutory timelines proposed like the Preliminary Report within T+45 etc. In addition, there are certain non-statutory timelines like opening of voluntary liquidation bank account. Mention each of the events and indicate the due date within which the liquidator intends to complete the event. Mention also needs to be made whether the timeline is statutory or tentative estimate of the liquidator.
Estimated costs of liquidation: Liquidator has to give item-wise costs of liquidation.
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