Services Provided by Chartered Accountant Firm for Voluntary Liquidation
Voluntary liquidation is a structured process for closing a solvent company, ensuring compliance with legal, financial, and regulatory requirements. It’s a formal process when shareholders decide to cease operations, through which solvent companies wind up their operations and distribute surplus assets to stakeholders. Governed under the Insolvency and Bankruptcy Code (IBC), 2016, voluntary liquidation requires strict compliance with legal, financial, and procedural mandates.
A Chartered Accountant (CA) firm plays a crucial role in ensuring that the voluntary liquidation process is smooth, compliant, and transparent. Below is a serially numbered and detailed list of services provided by a CA firm in voluntary liquidation matters:
Advisory on Suitability and Planning
- Pre-Liquidation Feasibility Analysis
- Assessing the financial health and solvency of the company.
- Solvency test verification
- Advisory on eligibility for voluntary liquidation under IBC.
- Verification that the company has no debt or can pay off its debts in full from sale of assets.
- Review of Memorandum & Articles of Association (MOA/AOA) to check authorization for voluntary liquidation.
- Evaluating Alternative options analysis
- Strategic Planning:
- They advise on the timing, implications, and preparatory steps for initiating the voluntary liquidation process.
Assistance in Declaration of Solvency
- Drafting of Declaration of Solvency by the majority of directors under Section 59(3)(a) of the IBC, confirming the company’s ability to pay its debts in full from the proceeds of asset sales and that the liquidation is not intended to defraud any person
- Preparation of supporting documents:
- Audited financial statements of the last 2 years.
- Latest Asset valuation report from a registered valuer (if applicable).
- Certificate of no pending legal proceedings.
- Detailed records of business operations
- Certification by a Chartered Accountant confirming the solvency and authenticity of the declaration.
- Regulatory Compliance Check :
- Outstanding statutory dues review
- Pending litigation assessment
- ROC compliance status verification
Appointment of Registered Valuer
Asset Valuation: Coordinating the appointment of a registered valuer to assess and report on the value of company assets, as required for the solvency declaration
Preparation of Required Board and Shareholder Resolutions
- Drafting resolutions for:
- Declaration of voluntary liquidation.
- Appointment of Liquidator.
- Approval of Declaration of Solvency.
- Convening and conducting Board and General Meetings under the Companies Act and IBC.
Appointment of Insolvency Professional as Liquidator
- Identifying Liquidator: Assisting in the selection and appointment of an independent Insolvency Professional, registered with IBBI, to act as the Liquidator.
- Identification of qualified IP
- Fee negotiation and engagement
- ROC intimation filing
- Drafting Engagement Agreements: Preparing formal agreements for the liquidator’s appointment and defining their scope of work
Public Announcement & Intimation Filing
- Filing with Authorities: Preparing and filing necessary forms and documents with the Registrar of Companies (ROC) and the Insolvency and Bankruptcy Board of India (IBBI)
- Assistance in drafting and publishing the public announcement in newspapers (one English and one vernacular) as per IBBI (Voluntary Liquidation Process) Regulations.
- Filing of Form GNL-2 and other necessary forms with ROC.
- Timely filing of Form A with IBBI, containing details of the voluntary liquidation commencement.
Preparation of List of Stakeholders
- Verifying and compiling a list of shareholders, creditors, and other stakeholders.
- Preparation of the List of Claims received and admitted.
- Circulation of the list to all stakeholders and ROC as required.
Asset Realisation and Distribution
- Asset Realization: Advising on the sale or realization of company assets in a transparent and efficient manner
- Asset Valuation & Sale :
- Fixed asset appraisal
- Inventory valuation
- Intellectual property disposal
- Debt Recovery :
- Accounts receivable collection
- Bad debt write-off advisory
- Secured vs unsecured creditor prioritization
- Asset Valuation & Sale :
- Settlement of Liabilities:
- Ensuring all outstanding debts, statutory dues, and obligations are settled in accordance with legal priorities.
- Distribution to Stakeholders:
- Overseeing the distribution of surplus funds to shareholders after all liabilities are discharged.
- Ensuring compliance with the prescribed order of priority under IBC for distribution.
Regulatory Compliance and Reporting
- Progress Reports: Preparing periodic reports on the status of liquidation for submission to the ROC, IBBI, and other stakeholders.
- Progress reports to NCLT
- Creditor meeting minutes
- Asset realization statements
- Maintenance of proper books of account during the liquidation process.
- Preparation of distribution statements and obtaining shareholder approval.
Taxation and Financial Closure
- Tax Advisory :
- Advising on tax implications of asset sales, settlement of liabilities, and final distribution.
- Filing of final Income Tax Return, TDS returns, and GST returns (if applicable)
- Assistance in closing PAN/TAN and GST registration
- Handling Tax Implications :
- Capital Gains Computation
- Slump sale vs itemized sale taxation
- Cost inflation index application
- Carry forward of losses analysis
- Other statutory compliances up to the date of dissolution
- Income tax clearance certificate
- EPFO/ESI settlement proof
Preparation of Final Report by Liquidator
- Assistance to the Liquidator in:
- Drafting the Final Report under Regulation 38.
- Preparing accounts and summary of realization and distribution.
- Obtaining audit report on liquidation accounts.
- Ensuring all required disclosures are made in accordance with IBBI regulations.
Filing of Final Documents with ROC and IBBI
- Application for dissolution with the National Company Law Tribunal (NCLT)
- Filing of Form GNL-2 with Final Report and Liquidation Accounts to ROC.
- Submission of Final Report and compliance checklist to IBBI.
- Ensuring the company is struck off from the Register of Companies upon completion.
Audit & Certification Support
- Statutory audit and review of liquidation accounts.
- Certification of solvency, net worth, and no dues for liquidation purpose.
- Assistance in obtaining “No Objection Certificates” (NOCs) from departments, if required.
Liaisoning with Stakeholders and Authorities
- Coordinating with:
- Shareholders and creditors.
- Statutory bodies like ROC, IBBI, Income Tax Department, and GST authorities.
- Responding to any clarifications or objections raised during the liquidation process.
Special Situation Handling
- Cross-Border Considerations :
- FEMA compliance for NRI shareholders
- Foreign asset disposal
- Double taxation avoidance
- Group Company Impact
- Intercompany loan settlement
- Guarantee revocation
- Related party transaction clearance
- Defunct Company Liquidation
- Fast-track process guidance
- Simplified documentation
- Cost-effective closure strategy
Post-Liquidation Advisory & Compliance
- Stakeholder Communication: Managing communication with stakeholders throughout the process and after dissolution
- Record Keeping: Assisting in the safe custody and transfer of company records as per statutory requirements.
- Advisory for promoters on launching new ventures after liquidation.