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Insolvency regulator IBBI has mandated the involvement of Stakeholders’ Consultation Committee (SCC) during the preparation of preliminary report in liquidation.
Liquidators should seek suggestions/observations of the members of the SCC while preparing the preliminary report, the IBBI said in a circular.
They should finalise the preliminary report only after considering such suggestions/observations of the members of the SCC and thereafter submit it to the Adjudicating Authority (AA), Board and members of SCC, it added.
Simultaneously, Insolvency and Bankruptcy Board of India (IBBI) has also mandated that liquidator must share progress reports on the liquidation with the SCC.
Currently, regulations provide that liquidator would have to submit progress reports, to the AA, IBBI and the Board within 15 days after the end of every quarter.
Hitherto, the regulation provided for submission of progress reports to the AA and the Board, it does not get shared with key stakeholders of the ecosystem, i.e creditors, thus leaving them unaware of the progress in the process thereby creating information asymmetry.
Expert’ take
Hari Hara Mishra, CEO, Association of ARCs in India, said “The involvement of SCC at the time of preparation of preliminary report in liquidation, will help the liquidator have a more reasoned commercial perspective to finalise best fit strategy in the situation”
Padmaja Kaul, Partner, INDUSLAW, said this IBBI move would facilitate substantive engagement with stakeholders prior to significant decisions, thereby ensuring their interests remain paramount.
Such a protocol will also cultivate ongoing dialogue and updates with creditors, who are key stakeholders in the ecosystem, further augmenting inclusivity and transparency, she added.
Deepika Kumari, Partner, King Stubb & Kasiva, said liquidator will now be actively disclosing information to the SCC in a timely manner, marking a positive and welcome step forward.
Engaging with stakeholders is the ultimate test of an independent and impartial process, she said. “With this change, the insolvency regime in India is set to be further strengthened, emphasising the importance of inclusive and transparent interactions.”
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