The Insolvency and Bankruptcy Board of India (“Board”) has introduced amendment in the Insolvency and Bankruptcy Board of India (Voluntary Liquidation Process) Regulations, 2017 vide notification F. No. IBBI/2022-23/GN/REG.081 dated April 5, 2022.
According to the amendment, the date of commencement of liquidation for the corporate persons (other than an Indian company) should be calculated from the date of receipt of approval from creditors1, if any, representing two-thirds in value of the debt of the corporate person.
The creditor's approval is required to be taken within 7 days of:
- passing of resolution by a special majority of partners or contributories, as the case may be, for liquidation of the corporate person and appointment of insolvency professional to act as a liquidator, or
- resolution passed by the partners or contributories, as the case may be, for liquidation of the corporate person on expiry of period of its duration, if any, fixed by its constitutional documents or on the occurrence of any event provided in the constitutional documents of the corporate person and appointment of insolvency professional to act as a liquidator.
Prior to the amendment, the liquidation commencement date was calculated from the date of receipt of declaration from majority of the designated partners, if the corporate person was a limited liability partnership or individuals constituting the governing body in case of other corporate persons, as the case may be stating that the aforementioned have made full inquiry into the affairs of the corporate person and such corporate person has no debt or that it will be able to pay its debts in full from the proceeds of assets sold in the liquidation, and that the corporate person is not being liquified for the purpose of defrauding for initiation of liquidation.
With the aim to reduce the timelines and to simplify the process of voluntary liquidation, the Board has also introduced some additional amendments vide the aforementioned notification. The key amendments are:
- The liquidator is required to prepare the list of stakeholders within 15 days from the last date for receipt of claims, if no claim from the creditor(s) has been received and within 45 days from the last date for receipt of claims, in case there of claims from the creditor(s). Earlier irrespective of the receipt of claims or not the liquidator had 45 days' time to prepare the list of stakeholders.
- The proceeds from realization of assets is now required to be paid to the stakeholders within 30 days from the receipt of the amount as opposed to the payment being made within 6 months.
- The time-limit for completion of liquidation process has been reduced from 12 months to 270 days from the liquidation commencement date where the creditors have approved the resolution, and 90 days from the liquidation commencement date where the approval of creditors is not required.
1 Creditor means any person to whom a debt is owed and includes a financial creditor, an operational creditor, a secured creditor, an unsecured creditor and a decree-holder.
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