Insolvency and Bankruptcy Board Amends Voluntary Winding-Up Process Regulations – Insolvency/Bankruptcy/Restructuring

0


India: Insolvency and Bankruptcy Board Amends Voluntary Liquidation Process Regulations

To print this article, all you need to do is be registered or log in to Mondaq.com.

The Board of Insolvency and Bankruptcy (IBBI) by notification dated April 5, 2022 amended IBBI (Voluntary Winding Up Process) Amendment Regulations 2022 (Amending Regulations).

The 2022 budget had set out the intention to expedite the voluntary liquidation process to provide greater flexibility for entities wishing to exit the business. Accordingly, IBBI released a discussion paper along with a draft rulebook for public comment in February 2022. Subsequently, IBBI has now notified the amending rulebook. The main highlights of the amending regulations are summarized in the table below:














Provision

comments

Notice of Appointment of Liquidator to IBBI

The liquidator is required to notify his appointment to IBBI within seven days from the date of his appointment compared to three days prior.


Nexdigm Comments: Respite is being provided to the liquidator as a three-day delay has proven administratively difficult.

Stakeholder list preparation time reduced in some cases

A proviso to sub-rule (2) of Rule 30 is added that if no claim is received by the last day for submitting a claim, the liquidator must prepare a list of stakeholders within 15 days from this, compared to the previous 45 days. chronology.


Nexdigm Comments: This significantly shortens the liquidation period in cases where no claim is received or likely to be received.

Reduced timeline for revenue distribution to stakeholders

The liquidator must distribute the proceeds of realization within one month of receipt of the amount to the stakeholders compared to the previous six-month period.


Nexdigm Comments: This is a welcome step as the distribution period is reduced and the liquidator and stakeholders do not need to wait for a six month period to be completed. In addition, it will ensure the preservation of the value of the assets.

Completion of voluntary liquidation

Timeline for completion of voluntary liquidation revised as follows:


  • The liquidator will endeavor to complete the liquidation within 270 days of commencement, in cases where creditors’ approval has been received for commencement of liquidation; and

  • The liquidator will endeavor to complete the liquidation within 90 days of commencement in all other cases.


Nexdigm Comments: This provides greater flexibility where liquidation will not negatively impact stakeholders.

The liquidator must submit a certificate of compliance with the final report

The liquidator is now required to provide a certificate of compliance on Form H with the final report in an application to the Court. The compliance certificate contains a summary of the voluntary liquidation process, including the time taken for various actions by the liquidator (within the prescribed period), details of receipts and payments during the process, etc.


Nexdigm Comments: The Certificate of Conformance is compliant with the certificate under CIRP. This allows the Court to know quickly and concisely the status of the various actions taken or not in accordance with the law by the liquidator.


More importantly, paragraph 9 of the aforementioned Certificate of Conformity states that “All unresolved matters pending, if any, before a court or tribunal relating to a legal entity have been reported to AA, together with details of the arrangements made to satisfy sufficiently the obligations arising from such pending litigation.This reiterates and contemplates that the entity may be dissolved pending any litigation as long as sufficient provisions are made against such pending litigation [Re SCA Hygiene Products India Pvt. Ltd in CP 981 of
2020].

Our comments

The Insolvency and Bankruptcy Code 2016 provides an entirely market-driven approach to the voluntary liquidation process to ensure faster results at the lowest possible cost. The Amending Rules reflect IBBI’s goal to be even faster and more cost effective. The reduced deadlines facilitate the task of the liquidator and the stakeholders. The requirement for a certificate of compliance is welcome as it may not be possible for the Court to sift through voluminous documents in each case to verify the compliances of the liquidator. It is pertinent to note that the voluntary liquidation procedure before the Court is not adversarial, and the dissolution of a legal person by the Court would be quick if the compliance checklist were available. However, the certificate of compliance is onerous in nature and the liquidator should be more careful in adhering to the regular procedure of voluntary liquidation.

The content of this article is intended to provide a general guide on the subject. Specialist advice should be sought regarding your particular situation.

POPULAR ARTICLES ON: Insolvency/Bankruptcy/Restructuring from India

Cross Border Insolvency Regime in India

Legal MZM

Generally, a cross-border insolvency situation arises when the debtor has assets or creditors in different jurisdictions or when different insolvency proceedings have been filed in several jurisdictions.

Share.

About Author

Comments are closed.