Answer By law4u team
The liquidator is a key figure in the Insolvency and Bankruptcy Code (IBC) liquidation process, responsible for managing and winding up the corporate debtor’s affairs. The liquidator’s role ensures fair asset realization and orderly distribution of proceeds to creditors, complying with legal and regulatory requirements.
Role and Responsibilities of the Liquidator
Taking Custody of Assets:
The liquidator assumes control of the corporate debtor’s assets, records, and books from the resolution professional or management.
Public Announcement and Claims Invitation:
Upon appointment, the liquidator publishes a public notice inviting claims from creditors, employees, and other stakeholders.
Verification and Admission of Claims:
The liquidator verifies submitted claims and prepares a list of admitted claims eligible for distribution.
Asset Management and Realization:
The liquidator manages the debtor’s assets to prevent loss, and sells assets via public auction, tender, or private sale to maximize value.
Distribution of Proceeds:
Distributes the proceeds to creditors as per the priority order specified under the IBC—secured creditors first, followed by operational creditors and others.
Maintaining Records and Reporting:
Maintains detailed records of all transactions and submits periodic reports to the National Company Law Tribunal (NCLT) and other authorities.
Legal Compliance and Litigation:
Ensures all liquidation activities comply with the IBC and other applicable laws, and represents the corporate debtor in legal matters related to liquidation.
Termination of Liquidation:
After completing asset realization and distribution, the liquidator applies to the NCLT for the dissolution of the corporate debtor.
Important Points:
- The liquidator acts as a fiduciary for the creditors and the corporate debtor.
- Must operate transparently, impartially, and diligently.
- Has the power to investigate transactions before liquidation.
- Enforces the moratorium protecting the debtor’s assets during liquidation.
Example:
XYZ Ltd. enters liquidation after failing to resolve insolvency. Mr. Verma is appointed as liquidator. He takes possession of XYZ Ltd.’s assets and publicly announces the liquidation process. Creditors submit claims which Mr. Verma verifies. He then organizes the sale of assets through public auction, collects proceeds, and distributes funds according to IBC priority. After completing the process, he files an application with the NCLT for dissolution of XYZ Ltd.
