IBBI Liquidation Process Amendment: IBBI Amendments: Insolvency Resolutions Get a Boost (Download PDF)

()

Download PDF of This Page (Size: 148.12 K)

The Insolvency and Bankruptcy Board of India has amended the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2018 to fix a time frame for identifying resolution applicants.

Image of IBBI Liquidation Process Amendment

Image of IBBI Liquidation Process Amendment

Image of IBBI Liquidation Process Amendment

  • The amended regulation makes it mandatory to identify the applicants by the 105th day, experts say the resolution process can be completed in a timely manner within the stipulated 180 days.

Background

  • Currently, there is no deadline for identifying resolution applicants.

  • The identification process and criteria keep changing till the end of the resolution period, which lead to delays in completion of the entire process.

  • The lack of a fixed period for identifying resolution professionals (RPs) was only one of the several factors behind the stretched bankruptcy resolution processes.

  • Legal challenges have dragged the outcome in some of the prominent cases.

  • The advantage of new amendment will ensure timely completion of the resolution process.

The IBBI Liquidation Process Amendment

  • The IBBI (Liquidation Process) (Amendment) Regulations, 2018 come into play after the insolvency resolution process is not successful.

  • Regulation 32 of the principal regulations provided four modes for liquidation of a corporate debtor:

    • sale on a stand-alone basis

    • slump sale

    • selling assets in parcel

    • selling assets collectively

  • After the latest amendment, the IBBI has added a fifth method of selling assets of the corporate debtor- ‘as a going concern’

  • “A going concern indicates that the company has not completely dissolved yet, even though its valuation may be considerably lower. This inclusion is in line with the spirit of the code.

  • “The objective of the code is to ensure continuity of the corporate debtor as a going concern to realize maximum value for creditors and ensure welfare of employees of the corporate debtor.

  • The amendment contemplates a scenario where, despite failure of the resolution process, the corporate debtor continues as a going concern. The liquidator then has the option to sell it as such, rather than in parcels, if he/she feels that selling the company as a going concern will fetch a better value than in bits and pieces.

  • The amendment brings to the fore the need to preserve, if possible, the status of the undertaking as a going concern, which will bring more value rather than selling assets of a closed undertaking.

  • This method of sale would protect contracts and arrangements that are under way and employees and stakeholders will benefit from the continued operations of the undertaking.

- Published/Last Modified on: August 8, 2018

Eco., Bills

Monthy-updated, fully-solved, large current affairs-2018 question bank(more than 2000 problems): Quickly cover most-important current-affairs questions with pointwise explanations especially designed for IAS, CBSE-NET, Bank-PO and other competetive exams.