IBBI amends liquidation norms, allows bidders more time to join auction
This story was originally published at 17:57 IST on 31 January 2025
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NEW DELHI – The Insolvency and Bankruptcy Board of India has amended the norms on liquidation, including an extension of the time allowed for prospective bidders to participate in the auction process of a company undergoing liquidation to 30 days from 14 days earlier.
The amendments to the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016 and the Insolvency and Bankruptcy Board of India (Voluntary Liquidation Process) Regulations, 2017 are aimed at strengthening the auction process of a company undergoing liquidation, the board said.
The board also said prospective bidders must submit necessary documents, including a declaration of eligibility under Section 29A of the Insolvency and Bankruptcy Code. The liquidator is required to verify the eligibility of the highest bidder within three days of the auction and consult the stakeholder consultation committee on the auction results, the amendments said.
If the highest bidder is found ineligible, the next highest eligible bidder may be considered, subject to consultation with the stakeholder consultation committee. Further, the liquidator of a company will now have to mention in the auction notice that the earnest money deposit of the successful bidder will be forfeited if found ineligible during the auction process.
Among other amendments, liquidators are now mandated to file the final report with the National Company Law Tribunal, when a scheme of compromise or arrangement is approved. Implementing this measure will improve accountability and regulatory oversight, the board said.
The board will continue to manage the corporate liquidation account and corporate voluntary liquidation account in a separate bank account with a scheduled bank as it has proven to be efficient in expeditious claim processing and overall fund management, said the amendments. In addition, voluntary liquidation processes can now be completed even if there is uncalled capital as there were adequate safeguards already in the regulations to protect the creditors and the provisions for realisation of uncalled capital or unpaid capital contribution may only result in avoidable delays, the amendments said.
The insolvency professionals are now required to submit the details related to liquidation and voluntary liquidation processes in the electronic forms available on the board’s portal. Further, regulations now require detailed disclosure of tax deductions by the liquidator before depositing unclaimed dividends and undistributed proceeds into the corporate liquidation account or corporate voluntary liquidation account. Forms have been updated to include fields for tax deduction confirmation, applicable provisions, and reasons for unclaimed dividends or undistributed proceeds, the amendments said. End
Reported by Surya Tripathi
Edited by Saji George Titus
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