The Insolvency and Bankruptcy Board of India (IBBI) has notified the Insolvency and Bankruptcy Board of India (Liquidation Process) (Second Amendment) Regulations, 2022 (‘Amendment Liquidation Regulations’) and Insolvency and Bankruptcy Board of India (Voluntary Liquidation Process) (Second Amendment) Regulations, 2022 (‘Amendment Voluntary Liquidation Regulations’).
The amendment notified on September 16, 2022, aims at enabling better participation of stakeholders and streamlining the liquidation process to reduce delays and realize better value, the amendment in Liquidation Regulations makes the following major modifications.
The Committee of Creditors (CoC) constituted during Corporate Insolvency Resolution Process (CIRP) shall function as the Stakeholders Consultation Committee (SCC) in the first 60 days. After adjudication of claims and within 60 days of initiation of the process, the SCC shall be reconstituted based upon admitted claims.
The liquidator has been mandated to conduct the meetings of SCC in a structured and time-bound manner with better participation of stakeholders.
The scope of mandatory consultation by the liquidator, with SCC, has been enlarged. Now, SCC may even propose the replacement of the liquidator with the Adjudicating Authority (AA) and fix the fees of the liquidator, if the CoC did not fix the same during CIRP.
If any claim is not filed during the liquidation process, then the amount of claim collated during CIRP shall be verified by the liquidator.
Wherever the CoC decides that the process of compromise or arrangement may be explored during the liquidation process, the liquidator shall file an application only in such cases before Adjudicating Authority for considering the proposal of compromise or arrangement, if any, within thirty days of the order of liquidation.
Specific event-based timelines have been stipulated for the auction process.
Before filing an application for dissolution or closure of the process, SCC shall advise the liquidator, on the manner in which proceedings in respect of avoidance transactions or fraudulent or wrongful trading, shall be pursued after the closure of liquidation proceedings.
The Amendment Liquidation Regulations and Amendment Voluntary Liquidation Regulations further lay down the manner and period of retention of records relating to liquidation and voluntary liquidation of a corporate debtor or corporate person, respectively.
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