MCA clarifies that pending winding up proceedings initiated under 1956 Act will continue to be governed by Companies (Court) Rules, 1959

MCA clarifies that pending winding up proceedings initiated under 1956 Act will continue to be governed by Companies (Court) Rules, 1959

July 6, 2017 Corporate 0

The Ministry of Corporate Affairs (“MCA”) has issued the Companies (Removal of Difficulties) Order, 2017 (“Order”) to clarify that pending winding up proceedings initiated under Companies Act,1956 (“Old Act”) will continue to be governed by the Old Act and the Companies (Court) Rules, 1959.

The Order is issued by way of a notification dated 29th June, 2017.

The Order has been issued to remove difficulties regarding transfer of proceedings relating to those cases of voluntary winding-up of a company where notice of the resolution by advertisement has been given but the company has not been dissolved before the 1st April, 2017.

Background:

Under Companies Act, 1956 (“Old Act”), any person could be appointed as a liquidator, who was required to make a report to the Official Liquidator. The Official Liquidator in turn had to make a report to the High Court for dissolution of the company.

However, under the Insolvency and Bankruptcy Code, 2016 (“Code”),only an insolvency professional can be appointed as a liquidator, who is required to make an application for dissolution directly to the National Company Law Tribunal.

It was observed that re-appointment of liquidators as per the Code by companies which had passed resolutions for voluntary winding up under the Old Act would create difficulties. Therefore, the Order aims to remove difficulties regarding transfer of proceedings relating to those cases of voluntary winding-up of a company where notice of the resolution by advertisement has been given but the company has not been dissolved before the 1st April, 2017.

Current Situation:

In order to remove the present difficulties relating to pending cases of voluntary winding-up, the Order has clarified that all proceedings relating to cases of voluntary winding up of a company where notice of the resolution by advertisement has been given under the Old Act but the company has not been dissolved before the 1st April, 2017 will continue to be dealt with in accordance with provisions of the Old Act and the Companies (Court) Rules, 1959.

SourceMinistry of Corporate Affairs

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