Insolvency

IBBI amends the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016

07.01.2020

The Insolvency and Bankruptcy Board of India (IBBI) notified the Insolvency and Bankruptcy Board of India (Liquidation Process) (Amendment) Regulations, 2020 on 6th January 2020. The amendment clarifies that, a person, who is not eligible under the Code to submit a resolution plan for insolvency resolution of the corporate debtor, shall not be a party in any manner to a compromise or arrangement of the corporate debtor under Section 230 of the Companies Act, 2013. Further, a secured creditor cannot sell or transfer an asset, which is subject to security interest, to any person, who is not eligible under the Code to submit a resolution plan for insolvency resolution of the corporate debtor.

The amendment provides that a secured creditor, who proceeds to realise its security interest, shall contribute its share of the insolvency resolution process cost, liquidation process cost and workmen’s dues, within 90 days of the liquidation commencement date. It shall also pay excess of realised value of the asset, which is subject to security interest, over the amount of its claims admitted, within 180 days of the liquidation commencement date. Where the secured creditor fails to pay such amounts to the Liquidator within 90 days or 180 days, the asset shall become part of Liquidation Estate. A Liquidator shall deposit the amount of unclaimed dividends, if any, and undistributed proceeds, if any, in a liquidation process along with any income earned thereon into the Corporate Liquidation Account before he submits an application for dissolution of the corporate debtor.

The Board shall nominate custodian of the Corporate Liquidation Account and no proceeds shall be withdrawn without his approval. Any amount deposited into the Corporate Liquidation Account in pursuance of the regulation, which remains unclaimed or undistributed for a period of fifteen years from the date of order of dissolution of the corporate debtor and any amount of income or interest received or earned in the Corporate Liquidation Account shall be transferred to the Consolidated Fund of India. A stakeholder, who claims to be entitled to any amount deposited into the Corporate Liquidation Account, may apply to the Board for an order.

Tags : Liquidation Process Regulation Amendment

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