“The amendments require completion of liquidation process within one year of its commencement, notwithstanding pendency of applications for avoidance transactions,” the IBBI release read.
The liquidation process of any corporate debtor under Insolvency and bankruptcy Code will have to be completed within one year of its commencement, according to amendments to the Insolvency and Bankruptcy Board of India (IBBI) (Liquidation Process) Regulations notified by the IBBI on Friday.
“The amendments require completion of liquidation process within one year of its commencement, notwithstanding pendency of applications for avoidance transactions,” the IBBI release read. “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 the stakeholders under Section 230 of the Companies Act, 2013.”
Further amendments on regulations pertaining to liquidation call for financial creditors to contribute towards the liquidation cost, in case the corporate debtor does not have adequate liquid resources to complete liquidation. In instances where the committee of creditors hasn’t approved a plan on such contribution during the corporate insolvency resolution process, financial creditors would have to contribute in proportion to the financial debts owed to them by the corporate debtor.
Such contributions, along with interest at bank rate there on will form part of liquidation cost, which is to be paid in priority. The amendments also delve into specifics of process over sale of corporate debtor as going concern under liquidation, where the process ‘shall be closed without dissolution of the corporate debtor’.
The IBBI also notified changes to the Insolvency Resolution Process for Corporate Persons regulations, which require that when approving a resolution plan or deciding to liquidate the corporate debtor, the CoC may also approve a plan providing for contribution for meeting the liquidation costs. The CoC can also recommend on sale of the corporate debtor or sale of business of the corporate debtor as a going concern, and fix fees payable to the liquidator in consultation with the resolution professional, in the event an order for liquidation is passed by the Adjudicating Authority.
The amendments also specified the process for withdrawal of applications before constitution of committee of creditors or after its constitution but before an invitation for expression of interest is issued, and after such a situation.