The Update has been drafted by Suman Kumar Jha (Founder & Managing Partner), Afnaan Siddiqui (Co-Founder & Partner), Visakha Raghuram (Associate) and Vaibhav Khurana (Associate).
The Insolvency and Bankruptcy Board of India (IBBI) has made significant amendments to primary regulations governing the process of Liquidation by way of notifications dated January 28th 2025. These amendments are focused on improved processes and accountability.
I. IBBI (Liquidation Process) (Amendment) Regulations, 2025
Amendments to the IBBI (Liquidation Process) Regulations, 2016, Notification- (F. No. IBBI/202425/GN/REG121).
Regulation 45 has been amended mandating the liquidator to file a final report in case a compromise or arrangement has been sanctioned under section 230 of the Companies Act, 2013. Previously liquidators had to submit an application along with the aforementioned final report in case the corporate debtor was sold as a ‘going concern’, the same will have to be followed in case of the corporate debtor having entered into a compromise or arrangement has been sanctioned under section 230 of the Companies Act, 2013.
Regulation 46(1) has been amended whereby, instead of opening a Corporate Voluntary Liquidation Account in the Public Accounts of India, the liquidator shall now maintain and operate an account to be called the Corporate Voluntary Liquidation Account with a scheduled bank.
Further, Regulation 47B has been inserted, whereby the Liquidator is mandated to file certain forms (‘LIQ 1’, ‘LIQ 2’, ‘LIQ 3’, and ‘LIQ 4’) pertaining to the voluntary liquidation process within the prescribed timelines. In case of delay in filing such forms, a fee of Rs. 500 shall be attracted for each calendar month. In case of failure to preserve records, file forms or furnishing incorrect information or delay in filing, the Board may take any action against the liquidator including refusal to issue or renew Authorisation for Assignment.
Various amendments have been made to Schedule I of the Regulations which prescribes the mode of sale of the assets. The first amendment omits the provision where the liquidator was mandated to give 14 days public notice for submission of eligibility documents by prospective bidder. A prospective bidder is now allowed access for the purposes of inspection and due diligence of the assets. Now the public notice by the liquidator shall mandate the requirement of an undertaking from the prospective bidder stating that they do not suffer from any ineligibility under Section 29A of the Code to the extent applicable. The Public Notice shall also state that if it is found otherwise, the earnest money deposited will be forfeited.
The Liquidator is now required to conduct due diligence of the highest bidder to verify eligibility. The consultation committee shall determine the successful bidder. If the highest bidder is found ineligible, his earnest money shall be forfeited and after consultation with the consultation committee, the next highest bidder may be declared the successful bidder. The table for Details of Stakeholders entitled to Unclaimed Dividends or Undistributed Proceeds has also been substituted.
II. IBBI (Voluntary Liquidation Process) (Amendment) Regulations, 2025
Amendments to the IBBI (Voluntary Liquidation Process) Regulations, 2017, Notification- (F. No. IBBI/202425/GN/REG120).
Regulation 33 which pertains to realization of uncalled capital or unpaid capital contribution by the Liquidator has been omitted. Regulation 39(1) has been amended whereby, instead of opening a Corporate Voluntary Liquidation Account in the Public Accounts of India, the liquidator shall now maintain and operate an account to be called the Corporate Voluntary Liquidation Account with a scheduled bank.
Further, Regulation 41A has been inserted, whereby the Liquidator is mandated to file certain forms (VL 1, VL 2, VL 3, VL 4) pertaining to the voluntary liquidation process within the prescribed timelines. In case of delay in filing such forms, a fee of Rs. 500 shall be attracted for each calendar month.
In case of failure to preserve records, file forms or furnishing incorrect information or delay in filing, the Board may take any action against the liquidator including refusal to issue or renew Authorisation for Assignment.