VOLUNTARY LIQUIDATION OF CORPORATE PERSONS SECTION 59

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1 VOLUNTARY LIQUIDATION OF CORPORATE PERSONS SECTION 59 Notification No. IBBI/ /GN/REG010 dated 31st March, 2017 IBBI has notified the Insolvency and Bankruptcy Board of India (Voluntary Liquidation Process) Regulations, The same has been published in the official gazette. As a result of the same w.e.f. 1 st April, 2017 voluntary winding up shall be conduct under Insolvency and Bankruptcy Code, 2016 (hereafter referred as IBC The Voluntary winding up process applies where the directors and shareholders decide to cease trading their solvent limited company. A. BOARD MEETING 1. Call board meeting and Pass a resolution for proposal of Voluntary Liquidation of the Company. 2. Prepare a declaration from majority of the directors of the company verified by an affidavit stating that a. they have made a full inquiry into the affairs of the company and they have formed an opinion that either the company has no debt or that it will be able to pay its debts in full from the proceeds of assets to be sold in the voluntary liquidation; and b. The company is not being liquidated to defraud any person. 1. File the declaration with ROC in e-form GNL-2 with following attachments a. audited financial statements and record of business operations of the corporate person for the previous two years or for the period since its incorporation, whichever is later; b. a report of the valuation of the assets of the corporate person, if any, prepared by a registered valuer; B. GENERAL MEETING 1. Within 4 weeks of passing of above said declaration hold the meeting of Shareholders and Pass a Special Resolution for approving the proposal of Voluntary Liquidation of the Company and Appoint an insolvency professional to act as the liquidator. File the special resolution with ROC in e-form MGT If the company owes any debt to any person, creditors representing two-thirds in value of the debt of the company shall approve the resolution within seven days of passing of such special resolution. 3. A voluntary liquidation for a corporate person shall be deemed to have commenced from the date of passing of the resolution (after approval from the creditors of the Company). C. PUBLIC ANNOUNCEMENT BY THE LIQUIDATOR: R 14

2 The liquidator shall make a public announcement in Form A of Schedule I within five days from his appointment (i.e. 5 days from the date of General Meeting) in following manner In one English and one regional language newspaper with wide circulation at the location of the registered office and principal office, if any, of the corporate person and any other location where in the opinion of the liquidator, the corporate person conducts material business operations On the website, if any, of the corporate person; and On the website, if any, designated by the Board for this purpose. The public announcement shall- Call upon stakeholders to submit their claims as on the liquidation commencement date; and Provide the last date for submission of claim, which shall be thirty days from the liquidation commencement date. D. PRELIMINARY REPORT R.9 The liquidator shall submit a Preliminary Report to the Company within 45 days from the liquidation commencement date, detailing as given below. The liquidator shall preserve a physical as well as an electronic copy of the reports for eight years after the dissolution of the corporate person. VERIFICATION OF CLAIMS R.29 (1) The liquidator shall verify the claims submitted within thirty days from the last date for receipt of claims and may either admit or reject the claim, in whole or in part, as the case may be, as per section 40 of the Code. (2) A creditor may appeal to the Adjudicating Authority against the decision of the liquidator as per section 42 of the Code. LIST OF STAKEHOLDERS (1) The liquidator shall prepare a list of stakeholders on the basis of proofs of claims submitted and accepted under these Regulations, with- o the amounts of claim admitted, if applicable, o the extent to which the debts or dues are secured or unsecured, if applicable, o the details of the stakeholders, and o the proofs admitted or rejected in part, and the proofs wholly rejected. (2) The liquidator shall prepare the list of stakeholders within forty-five days from the last date for receipt of claims. (3) The list of stakeholders, as modified from time to time, shall be- (a) available for inspection by the persons who submitted proofs of claim; (b) available for inspection by members, partners, directors and guarantors of the corporate person; displayed on the website, if any, of the corporate person; (d) displayed on the website, if any, designated by the Board for this purpose. ALL MONEY TO BE PAID IN TO BANK ACCOUNT R. 34

3 (1) The liquidator shall open a bank account in the name of the corporate person followed by the words in voluntary liquidation, in a scheduled bank, for the receipt of all moneys due to the corporate person. (2) The liquidator shall pay to the credit of the bank account opened under sub-regulation (1) all moneys, including cheques and demand drafts received by him as the liquidator of the corporate person, and the realizations of each day shall be deposited into the bank account without any deduction not later than the next working day. (3) The money in the credit of the bank account shall not be used except in accordance with section 53(1). (4) All payments out of the account by the liquidator above five thousand rupees shall be made by cheques drawn or online banking transactions against the bank account. DISTRIBUTION R. 35 (1) The liquidator shall distribute the proceeds from realization within six months from the receipt of the amount to the stakeholders. (2) The liquidation costs shall be deducted before such distribution is made. (3) The liquidator may, with the approval of the corporate person, distribute amongst the stakeholders, an asset that cannot be readily or advantageously sold due to its peculiar nature or other special circumstances. RETURN OF MONEY R. 36 A stakeholder shall forthwith return any monies received by him in distribution, which he was not entitled to at the time of distribution, or subsequently became not entitled to. Completion of liquidation R. 37 (1) The liquidator shall endeavor to complete the liquidation process of the corporate person within twelve months from the liquidation commencement date. (2) In the event of the liquidation process continuing for more than twelve months, the liquidator shall- (a) hold a meeting of the contributories of the corporate person within fifteen days from the end of the twelve months from the liquidation commencement date, and at the end every succeeding twelve months till dissolution of the corporate person; and (b) shall present an Annual Status Report(s) indicating progress in liquidation, including- (i) settlement of list of stakeholders, (ii) details of any assets that remains to be sold and realized, (iii) distribution made to the stakeholders, and (iv) distribution of unsold assets made to the stakeholders; (v) developments in any material litigation, by or against the corporate person; and (vi) filing of, and developments in applications for avoidance of transactions in accordance with Chapter III of Part II of the Code. (3) The Annual Status Report shall enclose the audited accounts of the liquidation showing the receipts and payments pertaining to liquidation since the liquidation commencement date.

4 Final Report R. 38. (1) On completion of the liquidation process, the liquidator shall prepare the Final Report consisting of (a) audited accounts of the liquidation, showing receipts and payments pertaining to liquidation since the liquidation commencement date; and (b) a statement demonstrating that- (i) the assets of the corporate person has been disposed of; (ii) the debt of the corporate person has been discharged to the satisfaction of the creditors; (iii) no litigation is pending against the corporate person or sufficient provision has been made to meet the obligations arising from any pending litigation. (c) a sale statement in respect of all assets containing - (i) the realized value; (ii) cost of realization, if any; (iii) the manner and mode of sale; (iv) an explanation for the shortfall, if the value realized is less than the value assigned by the registered valuer in the report of the valuation of assets under section 59(3)(b)(ii) or Regulation 3(1)(b)(ii), as the case may be; (v) the person to whom the sale is made; and (vi) any other relevant details of the sale. (2) The liquidator shall send the Final Report forthwith, to the Registrar and the Board. (3) The liquidator shall submit the Final Report to the Adjudicating Authority along with the application under section 59(7). SUBMISSION WITH NCLT Where affairs of company have been completely liquidated, the liquidator shall make an application to NCLT for dissolution of company ORDER BY NCLT IF nclt is satisfied then NCLT may pass a dissolution order and order of NCLT shall be filed to ROC Master Direction Amalgamation of Private Sector Banks, Directions, 2016 In exercise of the powers conferred by Section 35A of the Banking Regulation Act, 1949 and pursuant to the Section 44A of the Banking Regulation Act, 1949, the Reserve Bank of India being satisfied that it is necessary and expedient in the public interest so to do, hereby, issues the Directions hereinafter specified. These Directions shall be called the Reserve Bank of India (Amalgamation of Private Sector Banks) Directions, 2016 These directions shall come into effect on the day it is placed on the official website of the Reserve Bank of India (RBI).

5 The provisions of these Directions shall apply to all private sector banks licensed to operate in India by the RBI and to the Non-Banking Financial Companies (NBFC) registered with the RBI The principles underlying these Directions would be applicable, as appropriate, to public sector banks. Private Sector Banks means banks licensed to operate in India under Banking Regulation Act, 1949, other than Urban Co-operative Banks, Foreign Banks and banks licensed under specific Statutes. The Reserve Bank has discretionary powers to approve the voluntary amalgamation of two banking companies under the provisions of Section 44A of the Banking Regulation Act, Voluntary amalgamation of a NBFC with a banking company is governed by sections 232 to 234 of the Companies Act, 2013 in terms of which, the scheme of amalgamation has to be approved by the Tribunal These guidelines shall cover the following situations An amalgamation of two banking companies. An amalgamation of an NBFC with a banking company. 5.9B - AMALGAMATION BETWEEN TWO BANKING COMPANIES 1. Before convening the meeting for the purposes of obtaining the shareholders approval, the draft scheme of amalgamation needs to be approved individually by the Boards of Directors of the two banking companies While according this approval, the Boards of the banks shall give particular consideration to the following matters:- The values at which the assets, liabilities and the reserves of the amalgamated company are proposed to be incorporated into the books of the amalgamating company and whether such incorporation will result in a revaluation of assets upwards or credit being taken for unrealized gains. Whether due diligence exercise has been undertaken in respect of the amalgamated company. The nature of the consideration, which, the amalgamating company will pay to the shareholders of the amalgamated company. Whether the swap ratio has been determined by independent valuers having required competence and experience and whether in the opinion of the Board such swap ratio is fair and proper. The shareholding pattern in the two banking companies and whether as a result of the amalgamation and the swap ratio, the shareholding of any individual, entity or group in the amalgamating company will be violative of the Reserve Bank guidelines or require its specific approval. The impact of the amalgamation on the profitability and the capital adequacy ratio of the amalgamating company.

6 The changes which are proposed to be made in the composition of the board of directors of the amalgamating banking company, consequent upon the amalgamation and whether the resultant composition of the Board will be in conformity with the Reserve Bank guidelines in that behalf 2. Section 44A of the Banking Regulation Act, 1949 requires that the draft scheme of amalgamation has to be approved by the shareholders of each banking company by a resolution passed by a majority in number representing two-thirds in value of the shareholders, present in person or by proxy at a meeting called for the purpose. 3. Section 44A of the Banking Regulation Act, 1949 also requires that after the scheme of amalgamation is approved by the requisite majority of shareholders in accordance with the provisions of the Section, it shall be submitted to the Reserve Bank for sanction. 4. The RBI may sanction a scheme by an order in writing [section 44A (4)]. 5. A scheme sanctioned by the RBI shall be binding on the banking companies concerned and also on all the shareholders thereof [section 44A (4)]. 6. On the sanctioning of a scheme of amalgamation by the RBI, the property of the amalgamated banking company, i.e. the transferor company, shall, by virtue of the order of sanction, be transferred to and vest in the transferee company. [Section 44A (6)]. 7. Similarly, the liabilities of the transferor company shall, by virtue of the said order, be transferred to, and become the liabilities of the transferee company [section 44A (6)]. 8. Where a scheme of amalgamation is sanctioned by the RBI, the RBI may, by a further order in writing, direct that on the date specified in the order, the transferor company, shall stand dissolved [section 44A(6A)]. 9. A copy of the order directing dissolution of the amalgamated banking company shall be forwarded by the RBI to the office of the Registrar of companies at which it has been registered. On receipt of such order, the Registrar shall strike off the name of the company. [Section 44A (6B)]. 10. In terms of Section 44A (3), a dissenting shareholder is entitled, in the event of the scheme being sanctioned by the Reserve Bank, to claim within 3 months from the date of sanction, from the banking company concerned, in respect of the shares held by him in that company, their value as determined by the Reserve Bank when sanctioning the scheme and such determination by the Reserve Bank as to the value of the shares to be paid to the dissenting shareholders shall be final for all purposes. 5.9C - DISSENTING SHAREHOLDERS RIGHT TO CLAIM RETURN OF CAPITAL Any shareholder, who has voted against the scheme of a amalgamation at the meeting or has given notice in writing at or prior to the meeting to the company concerned or to the presiding officer of the meeting that he dissents from the scheme of amalgamation, shall be entitled in the event of the scheme being sanctioned by the RBI, to claim from the banking company concerned, in respect of the shares held by him in that company, their value as determined by the RBI when sanctioning the scheme [section 44A(3)]. The determination by the RBI regarding the value of the shares to be paid to the dissenting Shareholders shall be final for all purposes [section 44A (3)]. 5.9D - AMALGAMATION OF AN NBFC WITH BANKING COMPANY

7 Where the NBFC is proposed to be amalgamated into a banking company, the banking company should obtain the approval of the Reserve Bank of India after the scheme of amalgamation is approved by its Board but before it is submitted to the High Court (now NCLT) for approval. The following are ensured while granting the approval (a) The NBFC has violated / is likely to violate any of the RBI/SEBI norms and if so, ensure that these norms are complied with before the scheme of amalgamation is approved. (b) The NBFC has complied with the Know Your Customer norms for all the accounts, which will become accounts of the banking company after amalgamation. (c) The NBFC has availed of credit facilities from banks/fis and if so, whether the loan agreements mandate the NBFC to seek consent of the bank/fi concerned for the proposed merger/amalgamation. Master Direction - Issue and Pricing of shares by Private Sector Banks, Directions, 2016 In exercise of the powers conferred by 35 A of the Banking Regulation Act, 1949 the Reserve Bank of India being satisfied that it is necessary and expedient in the public interest so to do, hereby, issues the Directions hereinafter specified. These Directions shall be called the Reserve Bank of India (Issue and Pricing of Shares by Private Sector Banks) Directions, The provisions of these Directions shall apply to all private sector banks licensed by RBI to operate in India. Banks normally issue shares by way of: Public Issues Private Placement Rights Issue Bonus Issues Private sector bank, both listed and unlisted, has general permission for issue of shares through all the routes mentioned above subject to the following conditions: The issue of shares shall be in compliance with the provisions of Foreign Exchange Management Act, 1999 (FEMA) and extant Foreign Investment Policy of Government of India for Private Sector Banks. The issue of shares shall be in compliance with the extant SEBI guidelines, provisions of Companies Act and rules made thereunder. The issue of shares through any of the routes shall have the approval from the bank s Board / AGM, as the case may be in compliance with the Companies Act 2013 /SEBI guidelines. Pricing of shares through any of the routes by listed banks shall be as per SEBI formula, while for unlisted banks the pricing shall be as per Companies Act and rules made thereunder. Allotment of shares to the investors under any of the routes shall be subject to compliance with the extant RBI Master Directions dated November 19, 2015 on Prior approval for acquisition of shares or voting rights in private sector banks which requires investors to obtain specific prior approval of RBI

8 if the proposed acquisition results in aggregate holding of 5 per cent or more of the paid-up capital of the bank. The specific regulatory limits permitted to the shareholders or the promoters / promoter group shall not be breached on account of fresh subscription, own entitlement, renouncement of rights or otherwise. FAST TRACK INSOLVENCY RESOLUTION PROCESS (SECTION 55 TO 58) SECTION 55 An application for fast track corporate insolvency resolution process may be made in respect of the following company/ LLP, namely (a) a small company

9 (b) a Startup (other than the partnership firm) as defined in the notification of the Government of India in the Ministry of Commerce and Industry number G.S.R. 501(E), dated the 23rd May, 2017 published in the Gazette of India (c) an unlisted company with total assets, as reported in the financial statement of the immediately preceding financial year, not exceeding rupees one crore. SECTION 56 In case of fast track matters, the insolvency resolution process shall be completed within a period of a 90 days limit with a single extension of up to 45 days, if needed. Manner of initiating fast track corporate insolvency resolution process SECTION 57 An application for fast track corporate insolvency resolution process may be filed by a creditor or corporate debtor as the case may be, along with (a) the proof of the existence of default as evidenced by records available with an information utility or such other means as may be specified by the Board; and (b) such other information as may be specified by the Board to establish that the corporate debtor is eligible for fast track corporate insolvency resolution process. THE BANKING REGULATION (AMENDMENT) ORDINANCE, 2017 An Ordinance further to amend the Banking Regulation Act, Insertion of new Sections 35AA and 35AB In the Banking Regulation Act, 1949, after Section 35A, the following sections shall be inserted, namely 35AA. Power of Central Government to authorise Reserve Bank for issuing directions to banking companies to initiate insolvency resolution process The Central Government may by order authorise the Reserve Bank to issue directions to any banking company or banking companies to initiate insolvency resolution process in respect of a default, under the provisions of the Insolvency and Bankruptcy Code, Explanation. for the purposes of this section, default has the same meaning assigned to it in clause (12) of section 3 of the Insolvency and Bankruptcy Code, AB. Power of Reserve Bank to issue directions in respect of stressed assets (1) Without prejudice to the provisions of Section 35A, the Reserve Bank may, from time to time, issue directions to the banking companies for resolution of stressed assets. (2) The Reserve Bank may specify one or more authorities or committees with such members as the Reserve Bank may appoint or approve for appointment to advise banking companies on resolution of stressed assets..

10 4.15 Section 234 Merger or amalgamation of company with foreign company SEE THE BARE ACT LANGUAGE S.NO. PARTICULARS 1 234(1) Merger or amalgamation of company with foreign company 2 234(2) Merger or amalgamation of company with foreign company PROVISIONS (CROSS BORDER MERGER) The provisions of this Chapter unless otherwise provided under any other law for the time being in force, shall apply mutatis mutandis to schemes of mergers and amalgamations between companies registered under this Act and companies incorporated in the jurisdictions of such countries as may be notified from time to time by the Central Government: Provided that the Central Government may make rules, in consultation with the Reserve Bank of India, in connection with mergers and amalgamations provided under this section. Subject to the provisions of any other law for the time being in force, a foreign company, may with the prior approval of the Reserve Bank of India, merge into a company registered under this Act or vice versa and the terms and conditions of the scheme of merger may provide, among other things, for the payment of consideration to the shareholders of the merging company in cash, or in Depository Receipts, or partly in cash and partly in Depository Receipts, as the case may be, as per the scheme to be drawn up for the purpose. Explanation. For the purposes of sub-section (2), the expression foreign company means any company or body corporate incorporated outside India whether having a place of business in India or not

11 13th April, 2017 In the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016, (hereinafter referred to as the principal rules) after rule 25 the following rule shall be inserted 25A. Merger or amalgamation of a foreign company with a Company and vice versa. (1) A foreign company incorporated outside India may merge with an Indian company after obtaining prior approval of Reserve Bank of India and after complying with the provisions of sections 230 to 232 of the Act and these rules. (2) (a) A company may merge with a foreign company incorporated in any of the jurisdictions specified in Annexure B after obtaining prior approval of the Reserve Bank of India and after complying with provisions of sections 230 to 232 of the Act and these rules. (b) The transferee company shall ensure that valuation is conducted by valuers who are members of a recognised professional body in the jurisdiction of the transferee company and further that such valuation is in accordance with internationally accepted principles on accounting and valuation. A declaration to this effect shall be attached with the application made to Reserve Bank of India for obtaining its approval under clause (a) of this sub-rule. (3) The concerned company shall file an application before the Tribunal as per provisions of section 230 to section 232 of the Act and these rules after obtaining approvals specified in subrule (1) and sub-rule (2), as the case may be. Explanation 1. For the purposes of this rule the term company means a company as defined in clause (20) of section 2 of the Act and the term foreign company means a company or body corporate incorporated outside India whether having a place of business in India or not: Explanation 2. For the purposes of this rule, it is clarified that no amendment shall be made in this rule without consultation of the Reserve Bank of India.