Insolvency and Bankruptcy Board of India (Liquidation Process) 2nd Amendment Regulations, 2022

The Insolvency and Bankruptcy Board of India

22 Sep 2022

Categories : Articles

The author, Mr. Ravi Charan Pentapati is a Partner at Link Legal.

The Insolvency and Bankruptcy Code, 2016 (‘Code’) reconceptualised the framework for insolvency resolution in India. It provides a mechanism for the insolvency resolution of debtors in a time bound manner to enable maximisation of the value of their assets, with a view to promote entrepreneurship, availability of credit and balance the interests of all the stakeholders. As a matter of fact, it would take several years for any economic law to settle down and getting complete clarity on the working of the new legislation. The IBBI Board, Adjudicating Authority, the Appellate Authority, and judiciary have been at the forefront of the implementation of the Code and have settled or provided clarity to so many contentious issues for the purpose of streamlining the process for the future. One such recent amendment is Insolvency and Bankruptcy Board of India (Liquidation Process) (Second Amendment) Regulations, 2022 which was notified on 16.09.2022 which are primarily aimed to streamline certain processes to augment better recovery.

Some of the important amendments brought under the Second Amendment are outlined below:

Heading	Amendment brought in
Continuation of CoC for 60 days	The Committee of Creditors (CoC) constituted during Corporate Insolvency Resolution Process (CIRP) shall function as Stakeholders Consultation Committee (SCC) in the first 60 days.
Reconstitution of SCC	SCC will be reconstituted with voting rights based on amount of claims admitted within 60 days of initiation of process. Where SCC under Regulation 31A has been constituted before the commencement of (Second Amendment) Regulations, 2022, the liquidator within thirty days of the commencement of the said regulations, shall re-constitute the consultation committee.
Claims	If any claim is not filed during liquidation process, then the amount of claim collated during CIRP shall be verified by the liquidator. Liquidator shall also verify all claims submitted during liquidation.
Compromise or arrangement	If CoC decides that the process of compromise or arrangement may be explored during liquidation process, the liquidator shall file application only in such cases before Adjudicating Authority for considering the proposal of compromise or arrangement, if any, within 30 days of the order of liquidation.
Replacement of liquidator	SCC may by vote of not less 66% propose replacement of liquidator. SCC must file application before Adjudicating Authority for replacement of liquidator.
Conduct of meetings & voting	SCC shall advise the liquidator by a vote of not less than 66% of the representatives of SCC voting. CIRP regulations for conducting of meetings to be followed with modifications. Liquidator to report all such decisions taken by it in different to advice of SCC in the form specified by IBBI Board to Adjudicating Authority and Board within 5 days of such decision. A secured creditor who has not relinquished his security interest under section 52 shall not be part of SCC. Promoters, directors, partners, or their representatives may attend the meeting of the consultation committee with no right to vote. A financial creditor or his representative, if he is a related party of the corporate debtor have no right to vote.
Fixation of Fees	SCC may fix the fees of liquidator in this 1^stmeeting if CoC did not fix the fees under regulation 39 D of CIRP Regulations.
Submission of Progress Reports	Progress reports along with minutes of SCC to be submitted to both IBBI Board and Adjudicating Authority.
Timelines	Timelines have been prescribed for submission of eligibility documents; data room access, site visits; submission of earnest money deposit; conduct of successive auctions.
Asset Memorandum	Asset Memorandum to share with SCC with voting rights upon receipt of confidentiality undertaking from members of SCC and with IBBI Board.
Fate of Avoidance Proceedings (AP) after closure	SCC to decide the manner in which proceedings in respect of AP be proceed upon closure of liquidation proceedings along with the manner of distribution.
Maintenance of Records	Maintain record in (i) physical form for minimum period of 3 years and (ii)electronic form for minimum period of 8 years relating to liquidation process.