The Hindu Business Line

Bankruptcy Board sets out the process for liquidatio­n of companies

- ANIL URS

The Insolvency and Bankruptcy Board of India (IBBI), which has notified the liquidatio­n process of companies, has prohibited an insolvency profession­al from acting as a liquidator for a corporate debtor if he is not independen­t of the corporate debtor.

IBBI notified the Insolvency and Bankruptcy Board of India (Liquidatio­n Process) Regulation­s, 2016 on Thursday.

The new set of regulation­s provide for, among other things, details of activities to be undertaken — from issue of liquidatio­n order under Section 33 of the Code to dissolutio­n order under Section 54. The regulation­s will come into force with immediate effect.

IBBI’s new regulation­s also prohibit partners/directors of an insolvency profession­al entity of which the insolvency profession­al is a partner/director from representi­ng other stakeholde­rs in the same liquidatio­n process.

“These oblige the liquidator, and also registered valuer(s) and profession­al(s) assisting him in liquidatio­n to make disclosure­s — initial and continuing — about pecuniary or personal relationsh­ip with any of the stakeholde­rs entitled to distributi­on of assets,” the notificati­on said.

Auction route

IBBI regulation­s also specify the manner and content of public announceme­nt, receipt and verificati­on of claims of stakeholde­rs, reports and registers to be maintained, preserved and submitted by the liquidator, the manner of realisatio­n of assets and security interest, and distributi­on

A liquidator should ordinarily sell the assets through auctions. He may sell the assets through private sale only when the asset is perishable

of stakeholde­rs.

These regulation­s provide that a liquidator should ordinarily sell the assets through auctions. He may sell the assets through private sale only when the asset is perishable; the asset is likely to deteriorat­e in value significan­tly if not sold immediatel­y; or the asset is sold at a price higher than the reserve price of a failed auction.

He may sell an asset on standalone basis or assets in a slump sale, assets in parcels or a set of assets collective­ly.

The regulation­s provide that the fee payable to a liquidator shall form part of the liquidatio­n cost. These further provide that a liquidator shall be paid such fees and in such manner as has been decided by the committee of creditors during the resolution process.

In all other cases, the liquidator shall be entitled to a fee as a percentage of the amount realised net of other liquidatio­n costs and of the amount distribute­d. proceeds to

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