Insolvency and Bankruptcy Board of India (Liquidation Process) (Amendment) Regulations, 2019

Insolvency and Bankruptcy Board of India (Liquidation Process) (Amendment) Regulations, 2019 has been amended by a notification dated 25 July, 2019.

Following significant changes have been made by the amendment:

1. The amendment has introduced a stakeholder’s consultation committee to ensure their adequate representation in the decision making by the liquidator. Liquidator will constitute a stakeholders committee to assist him in sale of assets. If they fail to nominate their representatives to form the committee, then stakeholders with the highest claim amount in that class shall be included in the consultation committee. The committee will constitute members nominated by government, employees, shareholders or partners, operational creditors, unsecured financial creditors and secured financial creditors in proportion of their claims.
   
2. The liquidator is directed to convene meetings whenever he thinks it necessary, or upon receiving an application from the stakeholders committee, signed by more than fifty percent of nominees in the committee. The meetings will be chaired by the liquidator. The committee is given access to all relevant records and all recommendations of the committee of creditors is placed before the stakeholder’s consultation committee. The decisions of the committee, made with more than at least sixty six percent of the nominee’s votes, is send as an advice to the liquidator. The liquidator can implement the same or reject it by recording the reasons for doing so.
3. The definition of liquidation clause is expanded so as to include the costs of preserving and protecting the assets, running the corporate debtor’s business and repayment to contributories, but it excludes the amalgamation costs.
4. The liquidators fee is fixed as equivalent to the fee the resolution professional is entitled to while carrying out corporate insolvency resolution process according to Companies Act, 2013. The amendment alters the percentage of total amount of the realisation that has to be paid to the liquidator as fees. However, this new standard of fees shall have no retrospective application to liquidation process that have already commenced.
5. The amendment also provides the stakeholder’s an opportunity to amend their claims filed, before the last date mentioned in the public announcement. The secured creditors are provided a time limit to relinquish or realise their secured interest.
6. The amendment empowers the liquidator to sell the assets as a going concern, even against the advice of creditor’s committee, when he is convinced that it is more profitable. It also empowers the liquidator to conduct a fresh evaluation, but in a limited time.
7. The time limit for the liquidator to distribute the proceeds realised from liquidation among the stakeholders has been extended to ninety days and the period for liquidation is reduced to one year.
8. The amendment also restricts the pace at which the liquidator can reduce the auction price of the assets. The amendment mandates a compliance certificate to be filed along with the final report and prescribes the format for the same.
9. The amendment lays down a proper liquidation time line to be strictly complied with in Regulation 47.

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