Liquidators Must Justify Economically and Seek the Consultation Committee’s Advice Before Legal Proceedings | IBBI

Notification No. IBBI/2023-24/GN/REG112, Dated 12.02.2024

The IBBI has notified amendments to the IBBI (Liquidation Process) Regulations, 2016. The Amendments have been made to the following regulations:

1. Regulation 2B: Compromise or arrangement
2. Regulation 14: Early dissolution
3. Regulation 31A: Stakeholders’ consultation committee
4. Regulation 6A & 6B (newly introduced)
5. Regulation 32A: Sale as a going concern
6. Regulation 33: Mode of sale
7. Regulation 35: Valuation of assets intended to be sold
8. Regulation 46: Corporate Liquidation Account
9. Regulation 46A: Exclusion of certain assets from the liquidation estate (newly introduced)

The newly inserted Regulation 6A provides that before pursuing or initiating any legal proceedings, the liquidator must present the economic rationale and seek advice from the consultation committee.

Further, newly introduced Regulation 6B mandates the liquidator to present to the consultation committee, in every meeting:

(a) the actual liquidation cost along with reasons for exceeding the estimated cost, if any;

(b) the consolidated status of all the legal proceedings; and

(c) the progress made in the process.

Further, as per the amended norms, for early dissolution under Regulation 14, the liquidator shall now consult the consultation committee and if it advises for early dissolution, he may apply, along with a detailed report incorporating the views of the consultation committee, to the Adjudicating Authority. Previously, consultation requirement was absent for early dissolution.

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