CORPORATE LAW UPDATE
21st September 2022
Issue No. 11/22-23
THE INSOLVENCY AND BANKRUPTCY BOARD OF INDIA AMENDS THE LIQUIDATION PROCESS REGULATIONS AND THE VOLUNTARY LIQUIDATION PROCESS REGULATIONS
By Gazette Notifications bearing Nos. IBBI/2022-23/GN/REG094 and No. IBBI/2022-23/GN/REG095 dated 16th September, 2022, the Insolvency and Bankruptcy Board of India notified the Liquidation Process (Second Amendment) Regulations, 2022 (“Liquidation Amendment Regulations”) and Voluntary Liquidation Process (Second Amendment) Regulations, 2022 (“Voluntary Liquidation Amendment Regulations”).
The key amendments brought about by Liquidation Amendment Regulations are as follows:
- The Committee of Creditors (“CoC”) shall continue as the Stakeholders’ Consultation Committee (“SCC”) for the first sixty days post the commencement of the liquidation process. Thereafter, the SCC shall be reconstituted with voting within the 60 days based on the claims admitted by the liquidator.
- The SCC shall advice the liquidator on various matters such as valuation, after closure of liquidation proceedings, distribution of proceeds from such proceedings, etc. The SCC, in its first meeting, shall have the powers to fix the fee payable to the liquidator if the same was not fixed by the CoC during Corporate Insolvency Resolution Process (“CIRP”). The SCC shall also have the power to replace the liquidator with a majority vote of at least 66% in favour.
- The liquidator has to ensure that the meetings of the SCC shall be as per Regulations 18 to 26 of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 (“CIRP Regulations”).
- The application for consideration of compromise or arrangement shall be filed by the liquidator only when the CoC has decided to explore such opportunities under Regulation 39BA(1) of the CIRP Regulations. The application for the same shall be filed within 30 days of the liquidation order.
- If a stakeholder fails to submit claims during the liquidation process, the claims of the stakeholder as submitted by him to the Interim Resolution Professional or Resolution Professional during CIRP shall be deemed to be submitted for liquidation under section 38 of the Insolvency and Bankruptcy Code. The liquidator shall also verify the claims collated during CIRP within 30 days during liquidation process.
- If during the CIRP, the valuation of assets was conducted, in that case the asset memorandum shall be prepared within 30 days from the liquidation commencement date. In all other cases, it shall be prepared within 75 days.
- Furthermore, the liquidator shall issue a public notice for auction within 45 days from the liquidation commencement date. The prospective bidder shall be given a minimum of 14 days from issue of public notice for submission of eligibility documents and the prospective bidder can deposit the earnest money at any point in time upto 2 days prior to the auction date. The qualified bidder shall be given a minimum of 7 days from the date of declaration of qualified bidder for the inspection and or inspection or due diligence of assets under the auction.
In addition to the above, the Liquidation Amendment Regulations and the Voluntary Liquidation Amendment Regulations also specify provisions concerning the manner and the period for which records related to liquidation or voluntary liquidation, as the case maybe, are to be retained. The liquidator shall retain physical records for a minimum of 3 years and all electronic records for a minimum of 8 years.
The Liquidation Amendment Regulations can be accessed here and the Voluntary Liquidation Amendment Regulations can be accessed here.
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