IBBI Regulations on Voluntary Liquidation of Corporate Persons, 2017
Facilitating voluntary closure of solvent businesses under the Insolvency and Bankruptcy Code
In addition to a framework that mandates liquidation of a corporate person, among other grounds, on the failure of its insolvency resolution, the Insolvency and Bankruptcy Code, 2016 (Code) also provides for voluntary liquidation of a corporate person as long as it is solvent and has not defaulted on its debts.
A few months after the implementation of the core regulations for the corporate insolvency framework under the Code, the subordinate legislation pertaining to the voluntary liquidation process was drawn up and notified as the Insolvency and Bankruptcy Board of India (Voluntary Liquidation Process) Regulations, 2017. These Regulations lay down the detailed mechanism for voluntary liquidation of corporate persons.
The Regulations also provide for the appointment of a regulated insolvency professional as the liquidator. In detailing the powers and functions of the liquidator, the treatment of claims submitted by various creditors of the corporate debtor, the realisation of assets, and the distribution of proceeds of liquidation, these Regulations emphasize the importance of a speedy and efficient liquidation. They also outline the eligibility conditions for appointment of an insolvency professional as a liquidator.
These Regulations are useful for solvent businesses that intend to close their operations and dissolve the legal entity being used for carrying out the operations in an efficient manner.