IBBI Regulations on Liquidation of Corporate Persons, 2016
Facilitating liquidation of corporate persons under the Insolvency and Bankruptcy Code
The corporate insolvency framework under the Insolvency and Bankruptcy Code, 2016 (Code), puts in place a two-stage process first attempts revival of a defaulting corporate entity, failing which, it is to be swiftly liquidated. The Code prescribes objective grounds for liquidation of a corporate debtor.
The Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016 were drafted to put in place the subordinate legislation pertaining to the liquidation process under the Code.
These Regulations lay down a detailed, step-by-step process to enable an efficient liquidation process that achieves maximum value from the sale of the debtor’s and distribution of proceeds. They provide for the appointment of a regulated insolvency professional as the liquidator, who is to oversee the liquidation process, collect claims and file progress reports with the Adjudicating Authority.
The Regulations outline the eligibility conditions for appointment of an insolvency professional as a liquidator and stipulates rules for determination of her fee.
They also prescribe the methodology for determining the costs of the liquidation process, and detail the methods for sales, realisation of assets, and the distribution of proceeds in accordance with the distribution waterfall specified under the Code.