Insolvency regulator IBBI has now made it mandatory for liquidators to present fortnightly progress or status reports that would spell out the reasons for not completing the liquidation process within the stipulated period of 90 days or 270 days.
It has for this amended its existing regulations on voluntary liquidations.
“If the liquidator fails to liquidate the corporate person within the stipulated period of 90 days or 270 days as the case may be, he shall hold a meeting of contributors of the corporate person and present a status report within fifteen days from the end of such period and thereafter, at the end of every such succeeding period, specifying the reasons for not completing the process within the stipulated time period and apprise the meeting about additional time required for completing the process”, IBBI has said.
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The requirement of submission of progress reports every fortnight beyond the statutory timelines is expected to drive efficiency in the entire process through better monitoring, say experts.
Hari Hara Mishra, CEO, Association of ARCs in India said that the single largest challenge facing Insolvency and Bankruptcy Code (IBC) processes is adherence to timelines.
“It is in this context, a fortnightly progress report will serve as constant reminder, as time overrun is seen in 63 percent of voluntary liquidations”, Mishra told businessline.
In another measure,IBBI has also stipulated that the directors of the corporate person while initiating the voluntary liquidation process should disclose pending proceedings or assessments before statutory authorities, and pending litigations.
They would also be required to declare that sufficient provision has been made to meet the likely obligations arising, if any, on account of the pending proceedings, IBBI has said.
Also, in the period after submission of final report but before a corporate person is dissolved, stakeholders claiming entitlement to funds in the Corporate Voluntary Liquidation Account can apply to the liquidator for withdrawal.
Upon receiving such a request, the liquidator should verify the claim and request the Board to release the funds to him/her for onward distribution, the IBBI has said.
Mishra said that Payment of claims after submission of the final report without waiting for dissolution will help small entities, which constitute the majority of voluntary liquidations, put resources for alternate uses. “Ease of doing business includes ease of exiting business, which these changes intend to facilitate”, he added.