The Insolvency and Bankruptcy Board of India ("IBBI") recently amended the IBBI (Liquidation Process) Regulations, 2016 ("Liquidation Regulations") and IBBI (Voluntary Liquidation Process) Regulations, 2017 ("Voluntary Liquidation Regulations") (hereinafter collectively referred to as the "Regulations") vide the IBBI (Liquidation Process) (Amendment) Regulations, 2025 and the IBBI (Voluntary Liquidation Process) (Second Amendment) Regulations, 2025, respectively, notified on January 28, 2025 (hereinafter collectively referred to as the "Amendment Regulations").
Pursuant to the Amendment Regulations, the following changes have been introduced:
1. Submission of final report for scheme of compromise or arrangement
Under Regulation 45 of the Liquidation Regulations, the liquidator was required to submit an application along with the final report and the compliance certificate to the Adjudicating Authority for closure of the liquidation process of the corporate debtor where the corporate debtor was sold as a going concern. This requirement has not been extended to cases where a compromise or arrangement has been sanctioned under Section 230 of the Companies Act, 2013.
2. Maintenance of Corporate Liquidation Account and Corporate Voluntary Liquidation Account with a scheduled bank
Earlier, the IBBI was required to operate and maintain the Corporate Liquidation Account and Corporate Voluntary Liquidation Account with the Public Accounts of India. Pursuant to the Amendment Regulations, the aforesaid account(s) can now be maintained with a scheduled bank.
3. Submission of forms
The liquidator is now required to file certain forms, with necessary enclosures, on IBBI's electronic platform within the specified timelines under the relevant Regulations as follows:
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Liquidation Regulations |
Voluntary Liquidation Regulations |
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Form LIQ 1: This form covers the period from the liquidation commencement date until the public announcement, including details of the liquidator, corporate debtor, and liquidator's fee, etc. It must be filed on or before the 10th day of the subsequent month following the public announcement. |
Form VL 1: This form includes details about the corporate person, voluntary liquidation process, etc. It must be filed on or before the 10th day of the second month following the public announcement. |
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Form LIQ 2: This form covers the period from the public announcement to the Progress Report, detailing valuation, sale, litigations, avoidance transactions, and consultation committee meetings, etc. It should be filed on or before the 10th day of the subsequent month after submission of each Progress Report. |
Form VL 2: This form covers the meetings of contributories, reasons for delays, and details of any liquidator replacements, etc. It should be filed on or before the 10th day of the subsequent month following the meeting of contributories or liquidator replacement. |
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Form LIQ 3: This form covers the period from the final report to the dissolution application, including unclaimed proceeds, sale details, litigations, and distribution of proceeds, etc. It must be filed on or before the 10th day of the subsequent month following the submission of the dissolution/ closure application. |
Form VL 3: This form provides details of the dissolution application, unclaimed proceeds, realizations, pending litigations, etc. It must be filed on or before the 10th day of the subsequent month after submitting the dissolution or withdrawal/ suspension application to the Adjudicating Authority. |
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Form LIQ 4: This form covers the period from the dissolution application to the order of dissolution, including details of distribution of proceeds, payments, etc. It should be filed on or before the 14th day after the order for dissolution or closure is passed by the Adjudicating Authority. |
Form VL 4: This form includes details of the order for dissolution, including the distribution of proceeds, receipts, and payments, etc. It should be filed on or before the 14th day after the order for dissolution or the withdrawal/suspension of the voluntary liquidation process is passed. |
In relation to the submission of the above forms, the liquidator must ensure that all forms and enclosures are accurate and complete. Late filings, whether by correction, updation or otherwise, will incur a fee of Rs. 500 (Indian Rupees five hundred) per form for each calendar month of such delay. Further, in case of default/ delay in filing or providing incomplete or inaccurate information in the said forms, IBBI may take actions against the liquidator, including refusing to issue or renew the authorisation for assignment.
4. Auction Process under the Liquidation Regulations
a. Under the Liquidation Regulations, prospective bidders will be now provided access to the assets under auction to facilitate their inspection and due diligence.
b. All prospective bidders will now be required to submit the necessary documents, including a declaration of eligibility under Section 29A, as specified in the auction notice.
c. The liquidator is required to specify in the auction notice that the earnest money deposit will be forfeited if found ineligible during the auction process.
d. The liquidator must verify the eligibility of the highest bidder within 3 (three) days of declaring the highest bidder.
e. The auction results, highest bidder details, and due diligence must be presented by the liquidator to the consultation committee. The liquidator can declare the highest bidder as the successful bidder or reject such bid, after consultation with the consultation committee.
f. If a bidder is ineligible, their earnest money shall be forfeited and if the highest bidder is found ineligible, the liquidator may (in consultation with the consultation committee) declare the next highest bidder as the successful bidder.
5. Uncalled capital or unpaid capital contribution
Regulation 33 of the Voluntary Liquidation Regulations now stands deleted which means that the voluntary liquidation processes can now be completed even where capital contribution by the contributories to the uncalled or unpaid capital is pending.
6. Tax disclosures
Pursuant to the Amendment Regulations, the liquidator is required to provide detailed disclosures regarding tax deductions before depositing unclaimed dividends and undistributed proceeds into the Corporate Liquidation Account or Corporate Voluntary Liquidation Account, as the case maybe. The relevant forms have now been revised to include fields for confirming tax deductions, citing applicable statutory provisions, and explaining the reasons for unclaimed dividends or undistributed proceeds.
Author's view
The Amendment Regulations introduce crucial reforms aimed at improving the procedural efficiency and transparency of liquidation proceedings. The auction process has been sought to be strengthened by extending the timelines for participation, streamlining the eligibility verification process, and implementing clear consequences for ineligible bidders. The amendments are expected to foster broader participation in the auction process and expedite the liquidation processes by removing unnecessary delays and establishing measures for timely compliance.
The Amendment Regulations can be accessed here and here, and the Liquidation Regulations and Voluntary Liquidation Regulations (amended till January 29, 2025) can be accessed here and here.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
