IBBI updates liquidation process rules to boost transparency, efficiency
New Delhi, Feb 3, 2025
The amendments also introduce a late fee of Rs 500 per form per month for delayed filings on the IBBI portal, ensuring timely compliance by insolvency professionals
The Insolvency and Bankruptcy Board has amended regulations on liquidation process to streamline the auction procedure, improving reporting requirements, and ensuring better fund management.
The amendments, notified on January 28, 2025, with immediate effect, modify the Insolvency and Bankruptcy Board of India (Liquidation Process) regulations, 2016, and the Insolvency and Bankruptcy Board of India (Voluntary Liquidation Process) rules, 2017, according to release.
These measures will strengthen transparency, efficiency, and accountability in the insolvency framework.
Under the revised framework, the prospective bidders in the liquidation auction will now have more time -- 30 days to participate in the auction process than 14 days earlier, facilitating wider participation, the Insolvency and Bankruptcy Board (IBBI) said in the release.
Further, the liquidator is mandated to verify the eligibility of the highest bidder within three days of the auction and consult with the Stakeholder Consultation Committee (SCC) before finalising the auction.
If the highest bidder is found ineligible, the next highest eligible bidder may be considered. Additionally, the auction notice must specify that the Earnest Money Deposit (EMD) of the successful bidder will be forfeited if found ineligible.
The board has also reinforced fund management mechanisms, maintaining the Corporate Liquidation Account and Corporate Voluntary Liquidation Account with scheduled banks for more efficient claim processing.
Further, voluntary liquidation processes can now be completed even if uncalled capital exists, as existing safeguards are deemed sufficient to protect creditors.
The amendments also introduce a late fee of Rs 500 per form per month for delayed filings on the IBBI portal, ensuring timely compliance by insolvency professionals.
"Regulations now require detailed disclosure of tax deductions by the liquidator before depositing unclaimed dividends and undistributed proceeds into the corporate liquidation account or corporate voluntary liquidation account," the board said.
Forms have been updated to include fields for tax deduction confirmation, applicable provisions, and reasons for unclaimed dividends or undistributed proceeds, it added.
These measures will strengthen the insolvency ecosystem by addressing emerging challenges and ensuring greater efficiency and transparency in the liquidation proceedings.
[Press Trust of India]
