Insolvency and Bankruptcy Board of India has introduced the IBBI (Liquidation Process ) (Second Amendment) Regulations with the following changes:
A.No. IBBI/2022-23/GN/REG094–2nd amendment effective from 16.09.2022
1.Compromise or Arrangement: A new proviso has been added in Regulation 2B which states that where COC recommends compromise or arrangement such proposal shall be filed with with the AA within 30 days of the order of liquidation.
2.Liquidator fees: A new Regulation 4(1A) has been inserted which states that Where no fees for liquidator has been fixed by the COC then the consultation committee in the first meeting may fix the fees of liquidator.
3.Claim by stakeholder: A new clause has been added after clause c of Regulation 12(2) which states If any claim is not filed during liquidation process, then claim collated during CIRP shall be deemed to be submitted for the purpose of Regulation 38 of Liquidation Regulations.
4.Process Email: Regulation 12A has been inserted which states that the liquidator shall operate the process email account which was handed over to him by the resolution professional and in the event of his/her replacement, the credentials of the same shall be handed over to the new liquidator.
5.Verification of claim: Proviso has been added in Regulation 30 which states that liquidator shall also verify the claims collated during the corporate insolvency resolution process but not submitted during the liquidation process, within thirty days from the last date for receipt of claims during liquidation process.
6.Constitution of Consultation Committee: Regulation 31(1A) has been inserted which allows COC to function and vote as the consultation committee till the consultation committee is being appointed. Regulation 31A(1A) has been amended which requires the liquidator to constitute a consultation committee comprising of all creditors of the corporate debtor, within sixty days from the liquidation commencement date, based on the list of stakeholders prepared under regulation 31 to advice him on matter relating to remuneration of professionals appointed under Regulation 7, fees of liquidator, valuation, manner in which preferential and other transaction proceeding shall be carried out after liquidation closure and manner of distribution. Further Regulation 31(1A) has been inserted which allows COC to function and vote as the consultation committee till the consultation committee is being appointed.
7.Voting share: Regulation 31A(2) has been amended which now states that voting share of member of consultation committee shall be in proportions to admitted claims and secured creditor who has not relinquished his security interest under section 52 shall not be part of the consultation committee. Promoters/Shareholders/ partners and related creditors to have representation in SCC without voting right.
8.Stakeholders: Regulation 31A(3) has been amended and Regulation 31A(4A) has been added to state that liquidator may facilitate the stakeholders of each class namely financial creditors in a class, workmen, employees, government departments, other operational creditors, shareholders, partners, to nominate their representative for participation in the consultation committee and such representative shall vote in proportion to the voting share of stakeholder it represents.
9.First Consultation Committee Meeting: Regulation 31A(6) has been amended to state that first meeting of the consultation committee to be held within seven days of the liquidation commencement date and may convene other meetings, if he considers necessary, on a request received from one or more members of the consultation committee. In case request is made by members individually or collectively representing at least thirty three percent of the total voting rights then liquidator shall mandatorily convene the meeting.
10.Liquidator Replacement: Consultation committee may after recording the reason with majority vote of not less than 66% can replace the liquidator and shall file an application for such replacement with AA after obtaining written consent from proposed liquidator in Form AA of Schedule II. Outgoing liquidator shall be suitably remunerated for work performed, in consultation with SCC, and the existing liquidator shall continue to work till his replacement.
11.Conduct of meeting: Provision of regulations 18 to 26 of Chapter VI and Chapter VII of the Insolvency and Bankruptcy Board of India(Insolvency Resolution Process for Corporate Persons) Regulations, 2016 has been made applicable to conduct of meeting of Consultation committee.
12.Filling of decision Records: Regulation 31A (10) has been amended to state where the liquidator takes a decision different from the advice given by the consultation committee, he shall record the reasons for the same in writing submit the records relating to the said decision, to the Adjudicating Authority and to the Board within five days of the said decision; and include it in the next progress report
13.Time for preparation of Asset Memorandum changed to 30 days from the Liquidation commencement date: Regulation 34 has been amended which states that Where the valuation conducted during CIRP is being considered, the Liquidator shall prepare the AM within 30 days from liquidation commencement date, while using the information provided in IM and in other cases (Where no valuation was conducted or liquidator is of the opinion that fresh liquidation is needed), the AM shall be prepared within 75 days.
14.Sharing of Asset Memorandum: Liquidator shall share the Asset memorandum with the Board and members of the consultation committee having voting rights after receiving an undertaking from each member that such member shall maintain confidentiality of the information and shall not use such information to cause an undue gain or undue loss to itself or any other person.
15.Treatment of Avoidance transactions: Regulation 44A has been added to state that before application for dissolution or closure of process is filed, liquidator on the advice of SCC shall decide the manner and record the same in final report in which proceedings in respect of avoidance transactions, or fraudulent or wrongful trading, if any will be pursued after closure of liquidation process and the manner in which the proceeds, if any, from such proceedings shall be distributed.
16.Preservation of Records: Regulation 45A has been added to state that liquidator shall preserve copies of all such records which give a complete account of the liquidation. Records shall be preserved at a secure place in electronic form of all records (electronic and physical) for a minimum period of 8 years and physical copy of records for minimum period of 3 years from the date of dissolution of the corporate debtor or closure of the liquidation process or the conclusion of any proceeding relating to the liquidation process, before the Board, the Adjudicating Authority, Appellate Authority or any Court, whichever is later.
17.Timeline of auction: Schedule I has been amended to include that
a. If there is no compromise or arrangement proposal then liquidator shall issue a public notice of an auction for sale under regulation 32 within forty-five days from the liquidation commencement date unless the consultation committee advises to extend the timeline.
b. In the event of failure of an auction, the successive auction notice shall be issued within next 15 days of a failed auction unless SCC agrees to extension of this timeline, on specific ground(s).
c. Further liquidator shall complete the process within 35 days from the date of issue of public notice. Liquidator shall provide at least fourteen days from issue of public notice for submission of eligibility documents by prospective bidder.
d. Liquidator shall provide to qualified bidder at least seven days, for inspection or due diligence of assets under auction, from the date of declaration of qualified bidder and bidder shall deposit earnest money deposit at least up to two days before the date of auction.
18. Form AA for consent of liquidator : Form AA has been introduced in which liquidator shall submit his/her consent to act as liquidator to stakeholder consultation committee.
Amended Regulation:
