On April 5, 2022, IBBI, India’s leading Insolvency and Bankruptcy Code enforcement agency, changed the voluntary liquidation process, making it investor-friendly through reduced timeframes as well as introduction of a certificate of conformity. In this article, we highlight the main changes introduced by the Insolvency Commission.
The Indian Insolvency and Bankruptcy Board (IBBI), the apex regulatory body responsible for implementing the Insolvency and Bankruptcy Code (IBC), has introduced various changes to streamline and expedite the voluntary liquidation process.
The amendment ensures idle assets are released quickly for better productive uses without substantial erosion of value.
On April 5, 2022, IBBI notified the India Insolvency and Bankruptcy (Voluntary Liquidation Process) (Amendment) Regulations 2022 amend the 2017 Regulations. In addition, it also introduced a Certificate of Compliance – Form H.
Main amendments to the voluntary liquidation process
Term “corporate debtor” replaced by “legal person”
Pursuant to the amendment to section 10(2)(r) of the Regulations, the word “corporate debtor” is replaced by “corporate”. The liquidator keeps the other books or registers necessary to account for the transactions they have made concerning the legal person.
Reduced time to prepare stakeholder list if no complaints are received
In accordance with the amendment of Regulation 30 (2), a new clause has been inserted in which the liquidator must prepare the list of stakeholders within 15 days from the deadline for receipt of claims, in case no claim from creditors has not been received.
Reduction of the delivery time of the product of the realization
Section 35(1) has been amended to reduce the time for distribution of the proceeds of realization to stakeholders from the current six months to 30 days from receipt of the amount.
Reduced time to complete liquidation process
Regulation 37(1) has been amended to reduce the time for completion of the voluntary liquidation process and submission of the initial year’s final report to:
- 270 days from the date of initiation of the process – in cases where claims have been received from creditors.
- 90 days in cases where no claim has been received from a creditor.
This amendment strengthened freedom of exit for companies, making it easier to conduct business in India.
Introduction of the certificate of conformity – Form H
In accordance with Regulation 38(3), the liquidator must submit the final report and the certificate of compliance on Form-H.
Extension of notice period for appointment as liquidator to IBBI
Regulation 5(2) has been amended to increase the time limit for notifying IBBI of the insolvency practitioner’s appointment as liquidator from the first three days to now seven days.
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