Procedure for Voluntary Winding Up of a Company Under IBC

1. Procedure for Voluntary Winding Upof a Company UnderIBC The voluntary winding up of a company that is solvent can be accomplished under the Insolvency and Bankruptcy Code, 2016. Under the Insolvency Act 1986 is the Insolvency Rules 2016 that apply in England and Wales which sets out the procedure for the voluntary winding up of acompany. The Insolvency and Bankruptcy Code (IBC) 2016, which also covers individual bankruptcy, incorporates the Insolvency Act 1986 rules as well as the latest legislation that have modernised the liquidationprocess. What is theIBC? • The IBC was brought in via an Act of Parliament and is designed to resolve claims and shorten the process of liquidating insolvent companies. The aim of the code is to make the process easier to understand, deal with the bad loan problems, as well as protect the interests of the small investor in a company. Other key areas under IBCinclude: • The relationship between the debtor and creditor haschanged • The process is now time-bound in resolving insolvency – upon default of an agreed repayment, the creditor can take control of the debtor’s assets but must also make decisions to resolve the insolvencysituation • The debtor and the creditor can commence recovery proceedings against eachother • The insolvency process must be completed within 180 days for larger companies, which can be extended if the creditors do not object. For smaller businesses and start-ups,the

2. process must be completed within 90 days; this can also be extended by 45 days if creditors are in agreement. If there is no resolution within this period, the company isliquidated. The process to the voluntary winding up of a company under IBC When the directors of a company wish to close a solvent company, it can be done under IBC but it must still be conducted by a licensed insolvency practitioner (IP). The aim is still to cease trading, distribute the company’s assets and settle any outstanding debts. The process is similar to that of other winding up procedures and is asfollows: 1. The directors agree to wind up the company. They draw up a Declaration of Solvency, an affidavit, that confirms: There has been no default on debtrepayments; The company is solvent and is able to settle all its debts in full from the proceeds of the sale of the assets during voluntary liquidation;and The company is not being liquidated in order to defraudanyone. Within the declaration, every debt must be listed. There must also be audited financial statements, details of business operations over the past two years, or less if the company was incorporated for only a short period of time, and an asset valuation report that has been completed by a registered valuer; if there are anyassets.