IBBI allows firms to replace liquidator during voluntary liquidation process

The Insolvency and Bankruptcy Board of India (IBBI) has now allowed corporates the flexibility to replace its liquidator during a voluntary liquidation process. The existing liquidator can be replaced by appointing another insolvency professional as liquidator by a resolution of members or partners, or contributories, the IBBI has said.

Sources in the IBBI said earlier, there was no specific regulation allowing the liquidator to be replaced during voluntary liquidation. Now, this omission in law has been addressed.

For example, if any liquidator was appointed and he dies, then there was no way to go ahead in the absence of regulation permitting replacement. This is one situation which may require appointment of another resolution professional as the liquidator, experts said.

Diwakar Maheshwari, Dispute Resolution Partner, Khaitan & Co, a law firm, said this latest IBBI move will obviate any delay.

Sushmita Gandhi, Partner, IndusLaw, a law firm, said that the amendment allowing corporate debtors to replace a liquidator in a voluntary process is an important one giving the company the freedom to choose and replace a professional who will work in the best interest of the debtor in such voluntary insolvency process.

Clarification on fee

Meanwhile, the IBBI has also clarified that where a liquidator realises any amount, but does not distribute the same, he shall be entitled to a fee corresponding to the amount realised by him. Likewise, where a liquidator distributes any amount, which is not realised by him, he shall be entitled to a fee corresponding to the amount distributed by him.

Sources said with this, the IBBI has clarified that the liquidator will get paid only for the actual work he has done.

The clarification regarding the fees to be paid to a liquidator who realises the assets and who distributes it (in the event both are different) was essential to bring parity and effectiveness to the effort put by the respective liquidators, according to Sushmita Gandhi.