What Are The Powers And Duties Of A Liquidator

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What Are The Powers And Duties Of A Liquidator

When the company got bankrupt and there was a debt to be paid to the creditors and shareholders, then liquidators came into the picture. A liquidator is a person who is appointed at the time of the company’s bankruptcy to sell the assets.

After the company got bankrupt, the responsibilities of all parties go to the liquidator of all including the company, court, and creditors. They become the go-to person for taking decisions regarding the sale of assets and collecting money for settling the debt. Here in this article, the powers and duties of liquidator with functions are mentioned.

Who is a Liquidator?

A liquidator is a person who is appointed to liquidate the affairs of a company especially when the company got bankrupt. When assets got liquidated in the open market for cash something equivalent, then the liquidator has legally appointed to work on behalf of the company. 

In a General Meeting of a company where the resolution of winding up is passed, the liquidator must be appointed and the fees must be decided in the meeting. After the appointment, a liquidator must call a meeting and it should be done within 6 weeks from the general meeting.

However, the liquidator is also called the trustee. These are assigned by the court, by unsecured creditors, or by the company shareholders. They especially got appointed when a company goes bankrupt. After their appointment, they take over control of the company’s assets. All the assets are sold in the market and the cash received is used to pay off the debt.

What are the Powers and Duties of Liquidators?

Before knowing the powers, you should check one thing; the powers that are mentioned in the following are subjective to National Company Law Tribunal. 

This means that there is a code of conduct behind these powers and duties of liquidator and the adjudicating authority can strip away some of them or grant some new ones based on the needs of the liquidation process. Below are the powers of liquidator, which are as follows:

• Verify the claims of all the creditors and prevent the properties and assets. 
• Power to take control of all the assets and properties of the corporate company. However, what assets and properties he controls are based upon the needs of liquidation and the preliminary reports.
• Can sell the properties of the corporate debtor to only the individuals who are eligible to be resolution applicants.
• Can accept, draw, and endorse any instrument worth negotiating. It includes bills of exchange, hundi, or promissory notes on behalf of the corporate debtor. 
• Use his official name to take out a letter of administration to any deceased contributor.
• Perform other acts necessary to obtain the payment of any money due or payable from the contributory.
• Can ask for assistance from any professional or appoint anyone to discharge his obligations, responsibilities, and duties.
• Invite and settle the claims of the creditors and distribute the proceeds gathered from selling the assets of the corporate debtor among them.
• To institute or defend any prosecution, suit, or any other legal proceedings whether they are civil or criminal, in the name and on behalf of corporate debtors.
• Properly investigate the financial affairs of the corporate debtor to scan for undervalued or preferential transactions.

Steps Followed by The Liquidator

The liquidator has to perform the following tasks necessary for the liquidation of assets, distribution of its proceedings, and discharging his duties:

• Take all the actions related to selling the corporate assets
• Execute the steps, sell and collect the cash
• Verify on paper, deed, receipt document, petition, application, affidavit, instrument or bond or instrument or for such purpose to use the common seal.

The liquidator has to update the authority about the liquidation process in a timely way. So, these are the powers and duties a liquidator has to exercise throughout the liquidation process.

The Functions of a Liquidator

In a simple way, a liquidator should secure the assets of the company and make ensure that all the surplus collected from selling the goods will be used to settle all the debt. Other functions of liquidator are as follows:

• Realize all the assets of a bankrupt company and sell for the best possible price.
• Distribute money to all the creditors in the order of priority.
• Can go to the bank and ask for the bankrupt property to pay the wages, salary, or any other kind of income for a maximum of three years.
• Take direct actions against the director and other people in authority for the benefit of the creditors.
• Can replace individual items with another item whose value is more than a reasonable replacement. It excludes tools, vehicles, and domestic items such as furniture, and household equipment.

Conclusion

The liquidator is authorized to perform all the powers prescribed in the Companies Act, 2013. They are accountable to all the parties including shareholders and creditors. The main motive behind appointing a liquidator is to successfully wind up. So, all these are the powers and functions of liquidator during the bankruptcy of a company.

People also read: Insolvency and Bankruptcy Board of India (IBBI)

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