IBBI releases discussion paper on Voluntary Liquidation Process

The IBBI releases a discussion paper w.r.t. amendment to Voluntary Liquidation Process, Regulations, 2017 on 01st February 2022. In the discussion paper, IBBI has raised concern that the voluntary liquidation proceedings are unnecessarily got delayed and there is a critical need for a comprehensive review of the timelines provided for various activities under the voluntary liquidation process, to further streamline and strengthen the process. The focus is on compressing the overall process timeline.

Statement of the problem raised by IBBI

The IBBI raised the concern that the value of assets falls drastically with time. Therefore, it is important to ensure that the assets are liquidated quickly and efficiently. The Code, however, does not stipulate any time limit for completion of the voluntary liquidation process. Keeping into consideration the principle of preservation of time value enshrined in the BLRC report, the Voluntary Liquidation Regulations provides that the liquidator shall endeavour to complete the liquidation process of the corporate person within twelve months from the liquidation commencement date.

IBBI observed that majority of voluntary liquidations processes are getting delayed. IBBI held several meetings with the stakeholders in the past few months to review and take holistic view on the causes of delay in the voluntary liquidation processes and suggest suitable measures to address them.

Amendment proposed are:

(a) Reduction in the timeline for preparation of the list of stakeholders

IBBI proposed to reduce the timeline for preparation of the list of stakeholders by the liquidator to fifteen days from the last date for receipt of claims in case where no claims are received from the creditors. Under the extant norms the timeline for prepatioin of list of stakeholders is 45 days.

(b) Reduction in the timeline for distribution to stakeholders

IBBI has proposed for reduction of the period for distribution of proceeds from realization to the stakeholders from the current six months to a period of thirty days from the receipt of the amount.

(c) Amendment in the period for submission of Final Report by AA

IBBI has proposed to reduce the period of submission of the final report along with the application for dissolution, to the AA, to 90 days (where no claims are received) or 270 days (where claims are received from creditors), as the case may be.

(d) Introduction of the Compliance certificate and compliance checklist

The compliance certificate and checklist of compliances may also be submitted along with a final report to Adjudicating Authority as it would be expeditious for AA if the checklist of compliances is made available.IBBI also proposed the format of Compliance certificate in form-I.

IBBI has communicated that comments on the discussion paper may be submitted electronically by 22nd February 2022 by visiting the IBBI website, www.ibbi.gov.in.

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