The Insolvency and Bankruptcy Board of India ( ‘IBBI’ ) recently introduced major amendments through the IBBI ( Liquidation Process ) ( Amendment ) Regulations, 2024 ( ‘2024 Regulations’ ) to the existing IBBI (Liquidation Process) Regulations, 2016 aimed to refine the existing regulatory framework governing the liquidation process.
The Key Amendments are:
Proposal to be filed for Compromise or Arrangement The new regulation has amended Regulation 2B(1) of the 2016 Regulations, imposing stricter criteria for the filing of compromise or arrangement proposals. Under the revised regulations, the liquidator can only file such proposals if recommended by the committee under reg. 39BA of the IBBI ( Insolvency Resolution Process for Corporate Persons ) Regulations, 2016. The liquidator shall file the proposal of compromise or arrangement only in cases where such recommendation has been made by the committee under regulation 39BA of the Insolvency and Bankruptcy Board of India ( Insolvency Resolution Process for Corporate Persons ) Regulations, 2016.
Stakeholders’ Consultation Committee’s Advice mandatory for Early Dissolution For early dissolution under Regulation 14, the liquidator needs to consult the consultation committee and if it advises for early dissolution, he may apply, along with a detailed report incorporating the views of the consultation committee, to the Adjudicating Authority. Previously, consultation requirements were absent for early dissolution.
Role of the SCC enhanced in Advising the Liquidator The liquidator is required to consult the SCC before the initiation or continuation of any legal proceedings, extending the payment period of balance sale consideration beyond ninety days, or in case of a failed auction.
Quarterly Meetings and Reporting The IBBI has amended Regulation 31A(6) and now the liquidator shall convene subsequent meetings of the Stakeholders’ consultation committee within thirty days of the previous meeting, unless the consultation committee has extended the period between such meetings.
Decision Making for Viability of Sale of Corporate Debtor as a Going Concern If the liquidator deems it feasible to continue operating the corporate debtor as a going concern, he must seek guidance from the consultation committee. Only upon receiving the committee’s advice can the liquidator proceed with managing the affairs of the corporate debtor as a going concern, subject to the extent approved.
Valuation Procedures and Consultation Committee Oversight in Insolvency Proceedings The new requirement mandates the liquidator to organize meetings where registered valuers elucidate their methodology and rationale for any substantial deviations from the valuations conducted during the CIRP.
Withdrawal of Amounts from Corporate Liquidation Account and Stakeholder Claims Major amendments have also been made to Schedule I and II of the 2016 Regulations in the Compliance Certificate under Form H and Form A for reporting consultation with stakeholders. The said forms have been modified to process additional details such as the amount realized during liquidation, extension period in auction notice for balance sale consideration.
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