Liquidator’s Role: 15 Essential Responsibilities and Powers

After a liquidation order is approved under section 33 of the Insolvency and Bankruptcy Code, 2016, the adjudicating authority bestows all of the powers of the Board of Directors, important managerial staff, and partners, as appropriate, of the Corporate Debtor upon the liquidator, a professional in the field of insolvency. 

A Company Liquidator: What Is It? 

A corporate liquidator will be appointed under section 310 of the Companies Act 2013 if the company has made up its mind to wind up voluntarily. A company liquidator is a person designated by the creditors, shareholders, and court with their approval to handle the distribution and set-off of the business’s assets during the winding-up process. 

Additionally, liquidators must get a set fee. When the majority of creditors approve the appointment of a certain liquidator, the firm may designate a liquidator. Following appointment, he or she must carry out the several responsibilities and authority granted to a company liquidator by the company legislation. 

The creditors will appoint a different company liquidator if they object to the appointment of this one, but in any event, the appointment of a liquidation cannot be disregarded. Following their appointment, the company’s liquidator must submit a declaration within seven days of taking office. 

This statement must be made, and it must be kept up to date for the duration of the appointment or term of office, disclosing any conflicts of interest or lack of independence about his appointment with the company and its creditors. 

Functions and Role of Liquidator

The Code grants the role of liquidator along with specific authority and responsibilities upon confirmation. The Code’s Section 35 outlines a liquidator’s responsibilities and authority. These are the responsibilities and powers:

1. During the Corporate Insolvency Resolution Process (CIRP), the corporate debtor’s creditors assert several claims. The liquidator must examine and confirm the veracity of these assertions.
2. All of the corporate debtor’s assets, effects, and actionable claims are seized by the liquidator. All operational and managerial rights over the corporate debtor are relinquished by the directors and other management.
3. As soon as the liquidator has the corporate debtor’s property and assets, they must be assessed and a report must be written. The IBBI specifies how the evaluation must be carried out.
4. The liquidator must safeguard the corporate debtor’s best interests throughout the evaluation and, if required, preserve the relevant properties and assets.
5. Although the liquidation procedure results in the corporate debtor’s business ceasing to exist, the liquidator may choose to continue the business for beneficial liquidation.
6. The assets of the corporate debtor may be transferred by the liquidator during liquidation. Therefore, it has the option to sell the corporate debtor’s possessions and actionable claims through a private contract or at public auction. The Code’s Section 52 applies to this clause.
7. Regarding acts on any negotiable instrument of the corporate debtor, the liquidator will have the same rights as the corporate debtor. This relates to the obligation resulting from the liquidation of the assets.
8. When payments cannot be made in the regular course of business, the liquidator has the power to demand payments from any deceased contributing in the name of the corporate debtor. By obtaining a letter of administration in his official name, he can pursue the same.
9. The liquidator may designate another person to provide expert help if necessary. He may also designate another expert to carry out his tasks, obligations, and responsibilities.
10. Both claimant and creditor claims may be resolved by the liquidator. By following the Code’s guidelines, he can also divide the income.
11. Any lawsuit that may be brought for or against the corporate debtor may be initiated by the liquidator or defended by them.
12. The liquidator is able to start looking into the financial matters of the corporate debtor. This is something he can perform to identify undervalued and favorable transactions.
13. All documents related to the corporate debtor’s liquidation process are subject to ratification, verification, or execution by the liquidator. This covers, among other things, any affidavit, bond, application, or instrument.
14. The adjudicating body must receive a report from the liquidator outlining the status of the liquidation. The IBBI has specified the process. Additionally, the liquidator may request any required directives or orders from the adjudicating body.
15. Any additional duty as instructed by the IBBI.

Additional Role of Liquidator

In addition to the ones mentioned above, the role of liquidator also has the following obligations and rights:

1. As stated in Section 37 of the Code, the authority to accept and reject creditor claims as well as access any information system to confirm claims and locate assets that are a part of the corporate debtor’s liquidation estate.  Examples of these sources include information utilities, credit information systems, databases kept by the board, and central and state government agencies.
2. To assess any preferential deals that the corporate debtor may have undertaken.
3. Steer clear of transactions that are undervalued.
4. As per Section 53 of the Code, distribute the proceeds of the liquidation.
5. Once all of the company’s assets have been properly liquidated, apply for the corporate debtor’s dissolution.