IBBI TO TIGHTEN VOLUNTARY LIQUIDATION RULES
Liquidators of stressed firms seeking voluntary liquidation will have to explain to the bankruptcy watchdog their failure in completing the task on time and give a deadline for wrapping up the process, according to the proposals by the regulator to expedite the exit process of sick businesses.
Currently, liquidators are supposed to complete such processes either within 90 days or 270 days, depending on the cases. But in most cases, deadlines are missed, causing severe erosion of the stressed asset value.
Proposing half-a-dozen changes to its regulations on voluntary liquidations, the Insolvency and Bankruptcy Board of India (IBBI) has also asked the directors of such stressed firms to disclose pending litigations or proceedings involving statutory authorities about the companies.
Stakeholders have been asked to submit by October 26 their comments on the IBBI’s voluntary liquidation regulations.
“If the liquidator fails to liquidate the corporate person within stipulated period of 90 days or 270 days, as the case may be, he shall hold a meeting of contributories of the corporate person and file within 15 days after the end of the quarter in which the stipulated period for completion of liquidation has expired, a status report to the board explaining why the liquidation has not been completed and specify, along with reasons, the additional time that shall be required for completing the process,” the IBBI said in the proposed regulations.
For initiating voluntary liquidation, a financial service provider has to obtain prior permission of the appropriate regulator (mainly the Reserve Bank of India), the regulator said.
“Where a request for withdrawal (of voluntary liquidation) is received from the claimant, the board shall direct the liquidator in all such cases where dissolution order has not been passed, for verification of the claim,” the regulator said.
Such a verification will include checking the legitimacy of the claim, the amount involved, and any other relevant details. “Post verification, the liquidator shall submit their findings and opinion to the IBBI to enable it to permit withdrawal even before dissolution,” it said.
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