The Insolvency and Bankruptcy Board of India (IBBI) has amended its regulations to facilitate liquidation cases in a more transparent manner. A consultative committee of stakeholders will now be directly involved in the liquidation process.
The Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations were amended on Monday to bring the changes into effect.
As per the new rules, the liquidator must conduct meetings with stakeholders’ consultation committees (SCCs) within 30 days to enable greater participation in the process, unless the committee has extended the period of such meetings. The rules, however, mandate at least one meeting in each quarter.
The new rules mandate approvals from SCCs for litigations or other liquidation costs, cost-benefit analysis of various steps taken under the process, decisions for running the company as a going concern, approvals for private sale, conducting fresh valuations and confirmation of sale.
Sudhir Chandi, partner, Resurgent Resolution Profesional, said that the SCC has a significant role to play in the process of selling of assets for which various mechanisms have been stipulated. “This shall facilitate proper recording of the proceedings and monitoring of the progress of the liquidation case.”
Further, the amendment stipulates that the liquidator shall file the proposal of compromise or arrangement only in cases where such recommendation has been made by the committee of creditors (CoC). Earlier, liquidators were free to explore options of compromise/arrangement at their free will.
“The right to file such a proposal is more constrained this time, which is a factor contributing to the swiftness and fairness in the process,” said Anjali Jain, partner at Insolvency & Banking, Areness.
The liquidator is now held with more “stringent” rules and is required to operate within the definite guidelines, she said. For instance, valuation methodologies or reasons for deviations in valuation figures requires the liquidator to seek reasonable explanation from the concerned players.