Insolvency and Bankruptcy Board of India vide notification dated 5th October, 2023 has issued a Discussion Paper on Streamlining the Voluntary Liquidation Process.
- Disclosure of Pending Matters
One of the proposals suggests that corporate persons must disclose any pending proceedings, assessments before statutory authorities, and ongoing litigation. This will ensure that the liquidator and corporate person are aware of these matters, allowing for necessary provisions to be made for potential obligations arising from these issues.
- Timelines for Submission of Reports
The existing regulations stipulate time frames for the completion of the liquidation process. It is proposed that the regulations be amended to require liquidators to hold meetings of contributories if the process continues for more than the stipulated time. Furthermore, if the liquidator fails to complete the process within the specified time, they should provide a status report explaining the reasons for the delay.
- Financial Service Providers (FSPs)
FSPs have been an area of concern as some corporate persons initiated voluntary liquidation without obtaining prior permission from appropriate regulators, despite government notifications regarding their inclusion. The proposal suggests that corporate persons falling under the category of FSPs notify the board about obtaining prior permission from regulators.
- Withdrawal from Corporate Voluntary Liquidation Account
Currently, the mechanism for handling unclaimed deposits and undistributed proceeds during liquidation may cause delays. It is proposed that a mechanism be established to allow for the distribution of funds to claimants after the final report is submitted but before the order of dissolution.
- Submission of Final Reports
To streamline the submission process, it is proposed that final reports and compliance certificates be submitted electronically to a platform that will be notified by the Board.
- Order of Dissolution
The proposal suggests that regulations should be amended to explicitly require the submission of the order of dissolution to the Board, including the final data, to ensure that updated data is available.
The proposed amendments aim to provide clarity to stakeholders and facilitate a more efficient and transparent voluntary liquidation process. These changes should help in preventing delays, ensuring that only eligible corporate persons initiate the process, and allowing timely distribution to claimants.
The discussion paper includes a draft of the Insolvency and Bankruptcy Board of India (Voluntary Liquidation Process) (Amendment) Regulations, 2023, which details the proposed changes.
The IBBI has solicited public comments on these proposed changes, in accordance with its regulatory framework. Interested stakeholders are encouraged to provide their input on these amendments. Comments can be submitted electronically on the IBBI website by October 26, 2023.