Insights
IBBI (Liquidation Process) Regulations 2016 amended
January 6, 2020The IBBI has amended the Liquidation Process Regulations 2016, with effect from 6 January 2020. The key amendments, amongst others, relate to the operation and maintenance of a Corporate Liquidation Account, the timelines for payment by the secured creditor who realizes its assets to the liquidator, bar on the transfer of assets subject to security interest to any person who is not eligible to submit a resolution plan for the insolvency of the corporate debtor, under the IB Code and a bar on any such ineligible person to be a party to any compromise or arrangement u/s 230 of the Companies Act 2013 .
Corporate Liquidation Account [Regulation 46 substituted]
- The Board shall operate and maintain a Corporate Liquidation Account (CLA) as part of the Public Accounts of India, in which a liquidator shall deposit the amount of unclaimed dividends and undistributed proceeds, if any, in a liquidation process, along with any income earned thereon, before submitting an application for closure of the liquidation process or dissolution of the Corporate Debtor under sub-regulation 3 of Regulation 45.
- Any amount held as unclaimed dividends and undistributed proceeds as on the commencement of these Amendment Regulations, i.e. 6 January 2020, must be deposited by the liquidator into the CLA within 15 days of this date, along with any income earned thereon till this date. The liquidator shall be entitled to a receipt from the Board for any amount deposited;
- Failure to deposit such amount will be liable to an interest of 12% p.a. from the due date of deposit till the date of such deposit. [Until the CLA is operated as part of the Public Accounts of India, the Board shall open a separate bank account with a scheduled bank for this purpose ]
- The liquidator shall submit the evidence of deposit of the amount into the CLA to the authority with which the Corporate Debtor is registered and to the Board, and a statement in Form-I setting forth the nature of the amount deposited, along with the names and last known addresses of the stakeholders entitled to receive the unclaimed dividends or undistributed proceeds.
- A stakeholder entitled to any amount deposited with CLA may apply to the Board in prescribed Form-J for an order of withdrawal. No proceeds shall be withdrawn without the approval of the officer to be appointed as custodian of the CLA.
- The Board shall get the CLA audited annually. The audit report along with the statement of accounts of the CLA shall be placed before the Governing Board and forwarded to the Central Government.
- Any amount that remains unclaimed or undistributed for a period of 15 years from the date of order of dissolution of the corporate debtor and any income or interest earned in the CLA shall be transferred to the Consolidated Fund of India
Read More+
Presumption of security interest [Regulation 21A(2) substituted and (3) inserted]
A secured creditor who proceeds to realise its security, shall pay to the liquidator amounts payable under Section 53(1)(a) and (b)(i) of the Code, within 90 days from the liquidation commencement date. The excess of the realised value of the asset shall be paid within 180 days of the liquidation commencement date. In case of failure to do so, the asset which is subject to security interest shall become part of the liquidation estate. Where the payable amount is not certain by the date the amount is payable, the secured creditor will pay the amount as estimated by the liquidator and make good the difference as soon as it is ascertained.
Compromise or Arrangement (Proviso to Regulation 2B inserted)
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 such compromise or arrangement.
Realisation of security interest by secured creditor (Sub-regulation 8 in Regulation 37 inserted)
A secured creditor shall not 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.
To refer to the IBBI (Liquidation Process) (Amendment) Regulations 2020, dated 6 January 2020, click here.
Read Less-
Disclaimer
This is intended for general information purposes only. The views and opinions expressed in this article are those of the author/authors and does not necessarily reflect the views of the firm.
