Section 322: company in liquidation

Thirty-day notice by the liquidator

Every person who is the liquidator of a company being wound up (whether under court order or otherwise), or who has been appointed receiver of any of a company's assets - referred to as "the liquidator" - must, within thirty days of becoming such liquidator, give notice of his appointment to the Assessing Officer entitled to assess the company's income.

Assessing Officer's three-month response

After making such inquiries or calling for such information as he thinks fit, the Assessing Officer must notify the liquidator, within three months of receiving notice of the appointment, of the amount that in his opinion would be sufficient to provide for any tax that is then, or is likely thereafter to become, payable by the company.

Restrictions on the liquidator until the amount is set aside

The liquidator must not, without the leave of the Principal Chief Commissioner/Chief Commissioner/Principal Commissioner/Commissioner, part with any company assets or properties in his hands until notified under the process above; and once notified, he must set aside an amount equal to the notified amount, and cannot part with any assets or properties until he does so.

Permitted exceptions to the asset-freeze

The restriction above does not stop the liquidator from parting with assets or properties for:

• Payment of the tax payable by the company;
• Making payment to secured creditors whose debts are legally entitled to priority over debts due to Government on the date of liquidation; or
• Meeting winding-up costs and expenses considered reasonable by the Principal Chief Commissioner/Chief Commissioner/Principal Commissioner/Commissioner.

Personal liability for non-compliance

A liquidator who fails to give the required notice, fails to set aside the notified amount, or parts with company assets or properties in contravention of these rules, becomes personally liable for payment of the tax the company would be liable to pay - capped at the amount notified by the Assessing Officer.

Where there is more than one liquidator, the obligations and liabilities under Section 322 attach to all of them jointly and severally.

Overrides other laws, except the Insolvency and Bankruptcy Code, 2016

Section 322 has effect irrespective of anything to the contrary in any other law in force, except the provisions of the Insolvency and Bankruptcy Code, 2016.

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