Liquidation process has to be completed in one year: IBBI

Our Bureau New Delhi | Updated on July 26, 2019 Published on July 26, 2019

Insolvency regulator IBBI has made slew of changes to regulations around insolvency resolution process for corporates as well as the liquidation process.

The changes include specifying the process for withdrawal of applications before constitution of Committee of Creditors (CoC); after constitution of CoC but before issue of invitation of expression of interest, and after issue of invitation for expression of interest.

While approving a resolution plan or deciding to liquidate the corporate debtor, the CoC may approve a plan providing for contribution for meeting the liquidation costs.

The CoC may recommend sale of the corporate debtor or sale of business of the corporate debtor as a going concern.

On the changes in liquidation process, the IBBI has now specified that all the liquidation processes have to be completed within one year of its commencement. These provide a model timeline for each task in the liquidation process.

It also specifies a maximum time of 90 days from the order of liquidation for completion of compromise or arrangement, if any, proposed by shareholders under Section 230 of Companies Act 2013. These changes will ensure that liquidation process will close at the earliest.

Also, financial creditors, who are financial institutions, will have to contribute towards the liquidation cost, where the corporate debtor does not have adequate liquid resources to complete liquidation.

The amendments also specify the process for: (i) sale of corporate debtor as going concern and (ii) sale of business of corporate debtor as going concern under liquidation.

These also provide that where a corporate debtor is sold as a going concern, the liquidation process would have to be closed without dissolution of the corporate debtor.

Published on July 26, 2019
This article is closed for comments.
Please Email the Editor