Economic Survey urges need for simplifying voluntary liquidation process

A portal that combines all the steps of the liquidation process altogether, starting from application by companies to processing by all departments will prove to be very useful, it further said.

 

The Economic Survey 2021-22 has stressed on the need for a simplified procedure for voluntary liquidation of companies.“There is a case for simplifying the problems in the Voluntary Liquidation process, to improve ease of exit for business,” the Survey said.

“Apart from simplifying the issues in the various steps in the processes, there is a need for the creation of a single window for the entire process,” it added.

A portal that combines all the steps of the liquidation process altogether, starting from application by companies to processing by all departments will prove to be very useful, it further said.

Economic Survey 2022 updates

Liquidation can be involuntary as in the case of insolvency or bankruptcy; or voluntary which could be due to personal reasons, subsidiaries being merged.A company may decide to voluntarily close its operation even when it’s viable. There has been an overhaul in the process of winding-up due to the insolvency/ bankruptcy with the introduction of the Insolvency and Bankruptcy Code, 2016 (IBC).“However, the procedure of voluntary exit of business still needs to be simplified significantly, on top of recent progress,” the Survey said.Currently, there are two main methods of voluntary liquidation, one is through the Registrar of Companies (RoC) under section 248 of the Companies Act, 2013 and other is under the IBC. The former is currently the more popular route by far.Under Section 248(2) of the Companies Act, a company may, after extinguishing all its liabilities, by a special resolution or consent of 75% members in terms of paid-up share capital, may file an application in a prescribed manner to the Registrar of Companies (RoC).There must not be any pending litigations against the company and it has to follow a 5 step-by-step due procedure which is cumbersome.Besides, companies which have been incorporated for carrying on business objects like NBFC, Asset Management Companies, Insurance have to obtain NOC from their Regulatory authority like RBI, SEBI, IRDA respectively and this takes a long time.