A liquidator is a mediator between the company and the creditor during the time of winding up of a company. Winding up can be of any kind of company like Private Limited Company registration, Section 8 Company etc. A liquidator is appointed when a company is facing the wind-up process. Wind-up can be of two types: wind up by the tribunal or voluntary wind up of a company. In both processes, the liquidator plays a very important role. During the time of winding up of a company, the liquidator ensures the free and fair distribution of the assets of the company. Without the liquidator, it is almost impossible for the court to execute the wind-up process. There were various provisions regarding the liquidator under the Companies Act 2013. The current blog will discuss section 314 of the Companies Act of 2013, which talks about the powers and duties of company liquidator during the time of the voluntary wind-up process.
What is the Voluntary Wind Up of a Company?
A voluntary wind-up of a company is without the intervention of the tribunal after passing a resolution requiring the company to wind up voluntarily. As per section 304 of the Company Act 2013, the voluntary transaction is possible in two cases: first, if the company, in its general meeting, passes a resolution that mandatorily requires the company to be wound up through the voluntary wind-up process because of the expiry of the pre-decided period for its existence. In the second scenario, when the company passes the special resolution that the company should be wound up, then in both situations, voluntary wind up of the company is possible.
In the entire process of winding up, a liquidator plays an essential role. While a company is winding up, there are various powers and duties of the company liquidator that one needs to complete. Without the help of liquidators winding up a company either by the tribunal or by voluntarily is almost impossible. For a better understanding of the importance of a liquidator in the process of voluntarily winding up a company, one must read section 314 of the Companies Act of 2013, where powers and duties of company liquidator during the time of voluntary wind-up have been prescribed.
What is a Company Liquidator?
When the decision of a company becomes final for the voluntary winding up of a company, then under section 310 of the Companies Act 2013, an appointment of a company liquidator will be held. An individual who is appointed by the creditors, shareholders and court with mutual consent for the set-off and distribution of the assets of the company during the time of winding up is known as a company liquidator. Liquidators also need to be paid a particular amount of fees. Appointment of a company liquidator is possible when the majority of creditors approve the appointment of a particular liquidator. After the appointment he or she has to perform the various powers and duties of company liquidator given under the company law.
If the creditors do not approve the appointment of such company liquidator, creditors shall appoint another company liquidator, but the appointment of a liquidator cannot be ignored in any case. Once the liquidator of the company is appointed, he or she has to file a declaration within seven days of such appointment. Through that declaration, one needs to disclose the conflict of interest or lack of independence and respect of his appointment, if any, with the company and the creditors and such application shall continue throughout the term of office or its appointment.
Powers of Liquidator in the Voluntary Winding Up of a Company?
There are multiple powers and duties of company liquidator. Out of those, if we talk particularly regarding the powers of the liquidator, there are two types of powers. The two types of powers of liquidators are given below in detail:
Powers with Sanction Of Court
There are the following types of powers of a company liquidator with the sanction of the court:
- To defend any type of trial in the name of the company. The trial can be related to either criminal or civil cases.
- He or she can take care of the operation of the company
- Can sell the immovable property and actionable claims of the company. Sale can be through the public auction or private contract
- It can raise money if required, for the security of the assets of the company
- As there are various powers and duties of company liquidator, it’s really difficult to cope with them all alone. Hence if any help is required, then for his personal assistance, he or she can appoint a pleader, attorney or an advocate.
- With respect to the discharge of any claim, a liquidator can take securities from the debtors of the company.
- Make arrangements between the company and the debtors with respect to the debt and any other financial liability
Powers without Sanction Of Court
There are the following types of powers of a company liquidator without the sanction of the court:
- Can check the records and returns with respect to the company. These records and returns are inspected through the files of the registrar
- Can do any such act which required to do on behalf of the company
- Can execute all the deeds and documents of the company
- Can deal with the bill of exchange on behalf of the company. With respect to a bill of exchange a liquidator can accept, draw, make and endorse it.
- Can appoint an individual as its agent for performing any such powers and duties of company liquidator which he or she as a liquidator is unable to perform.
- In case of insolvency, a liquidator can receive the dividends on behalf of the company
Duties of Liquidator in the Voluntary Winding Up of a Company
Out of the powers and duties of company liquidator, some of the duties of a liquidator in the winding up of a company are given below:
- Must provide notice of appointment of the liquidator to the respective authorities
- It is required to conduct proceedings while voluntary winding up of the company
- To submit the preliminary report
- Companys’ property must be collected or distributed by the liquidator of the company if required.
- It cannot go beyond the order of the court. Must have to obey the order passed by the court
- Needs to hold meetings for creditors as well as contributors whenever the situation demands the same
- Maintaining the paper books and accounts of the company
- The appointment of an inspection committee by the liquidator of the company is needed
- Must provide the information regarding the pending liquidation of the company
- Investigation of the affairs of the company if needed
Section 314 of the Companies Act of 2013
Under Section 314 of the company law powers and duties of company liquidator during the time of the voluntary winding-up process have been given in detail. Some of the important powers and duties of company liquidator while doing the voluntary winding-up process of any kind of company are given below:
- Function and discharge of such duties which are determined by the company or the creditors of the company
- Needs to settle the list of contributors
- Sometimes, it needs to call a general meeting of the respective company in order to obtain the sanction of the company by the ordinary or special resolution
- Needs to maintain regular and proper books of account of the company
- Needs to prepare quarterly statements of accounts of the company
- Needs to pay the debt of the company if it is required
- Adjust the rights of the contributors of the company
- Must observe due care and diligence in the discharge of the powers and duties
Conclusion
In the voluntary winding-up process of a company, the company liquidator plays a pivotal role in ensuring the fair distribution of assets and the smooth execution of the winding-up proceedings. Appointed through mutual consent of creditors, shareholders, and the court, the liquidator must carry out a range of powers and duties outlined in the Companies Act of 2013. Powers and duties of company liquidator encompass both court-sanctioned powers, such as defending the company in trials, selling assets, and managing finances, and powers without court approval, like inspecting records, executing documents, and dealing with bills of exchange. Section 314 of the Companies Act of 2013 elaborates on these powers and duties, emphasizing the importance of diligent discharge. Overall, the liquidator serves as a crucial intermediary between the company and its stakeholders during the voluntary winding-up process, ensuring transparency, compliance, and the equitable resolution of company affairs.
