Friday, 30 March 2018

Liquidator may sell the corporate debtor as a going concern: IBBI

The Insolvency and Bankruptcy Board of India (“IBBI") issues IBBI(Insolvency Resolution Process for Corporate Persons) (Second Amendment) Regulations, 2018 and the IBBI(Liquidation Process) (Amendment) Regulations, 2018.

These regulations shall be effective from 1st April, 2018.

IBBI (Liquidation Process) (Amendment) Regulations, 2018 inserted the definition of “liquidation cost” which is:

(ea) “liquidation cost” under sub-section 16 of section 5 means-
            (a) fees payable to liquidation under regulation 4;
            (b) remuneration payable to liquidator under regulation 7;
            (c) cost incurred by the liquidator under regulation 24; and
(d) interest on interim finance for a period of twelve months or for a period from the liquidation commencement date till repayment of interim finance, whichever is lower.”

Further, IBBI (Liquidation Process) (Amendment) Regulations, 2018 allows the liquidator to sell the corporate debtor as a going concern. Now Regulation 32 allows Liquidator to realize the assets of in the following manner:

            (a) sell an asset on a standalone basis; or
            (b) sell
·      the asset in a slump sale,
·      a set of assets collectively;
·      the assets in parcels; or
(c) sell the corporate debtor as a going concern.

IBBI also amends IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016, wherein after the 1st April 2018 resolution professional would be required to disclose item wise insolvency resolution process cost and resolution professional shall identify the prospective resolution applicants on or before the 105th day from the insolvency commencement date.

Thereafter, IBBI states that as per the amendment Regulation the expenses incurred by resolution professional would be considered as the fee to be paid to the IRP, fee to be paid to insolvency professional entity (if any) and fee to be paid to professionals (if any) and other expenses to be incurred by the IRP.

The amendment Regulation clearly directs financial creditor to declare whether financial creditor is or is not related party in relation to the corporate debtor while submitting the claim to the interim resolution professional. The Amendment Regulation also disperses with the requirement of affidavit that was required to be submitted with the forms for submission of claims from claimants.

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