The Insolvency and Bankruptcy Board of India (IBBI) notified IBBI (Voluntary Liqudiation Process) (Amendment) Regulation, 2024 (Amendment Regulations) on 31 January 2024. The Amendment Regulations enhance disclosure requirements with respect to voluntary liquidation regulations aimed to streamline the process further.
The key changes introduced by the Amendment Regulations are summarized below:
Sr No. | Amendment | Comments |
1 | Disclosure of pending litigation, if any, and provision in respect thereof |
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2 | Status Report in case voluntary liquidation exceeds prescribed days from commencement date |
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3 | Claims for unclaimed dividends and unclaimed proceeds by stakeholders |
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Our Comments
In October 2023, IBBI floated a discussion paper to streamline
the voluntary liquidation process and invited public comments on
draft voluntary liquidation process regulations covering the above
aspects. The prime objective behind the voluntary liquidation
regulation was stated to be to provide for a completely
market-driven approach in the voluntary liquidation process to
ensure faster outcomes at the least possible cost. The Amendment
Regulations seek to expedite the voluntary liquidation process
further.
In line with that, the Amendment Regulations seek to prescribe the disclosure requirements in terms of disclosure of pending litigations and submission of status reports. It further prescribes the process to claim the distribution after liquidation of affairs of the corporate person but before dissolution. The liquidator is entrusted with verification of any such distribution claim before the dissolution of the corporate person. IBBI observed that the delay is generally on account of delay in making foreign remittances, pending appeals regarding demand/penalty imposed and refund from statutory departments and other litigations. Therefore, it prescribed the disclosure of pending litigations, if any, at the commencement of liquidation and further prescribed to state that sufficient provision has been made to meet the obligation arising, if any, on account of such pending matters. This is a welcome step as it re-emphasizes that liquidation can be proceeded amidst pending litigation. However, it would have been better if some guidance was given on how such a provision can be made. In the absence of such guidance, this is an onerous declaration on the part of the directors. Also, the periodical status report has increased the compliance burden as the meeting of contributories and audit of the liquidation accounts is required to comply with the status report submission. |
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