IBBI Amends Liquidation Process Regulations

The Insolvency and Bankruptcy Board of India (IBBI) has notified the Insolvency and Bankruptcy Board of India (Liquidation Process) (Amendment) Regulations, 2025 and Insolvency and Bankruptcy Board of India (Voluntary Liquidation Process) (Second Amendment) Regulations, 2025 on January 28, 2025, effective immediately. Changes have been made pertaining to:

• Auction Process: The timeline for bidders to participate in the auction process has been enhanced from 14 days to about 30 days while streamlining the verification process. The forfeiture of the earnest money deposit (EMD) of the successful bidder if found ineligible must be mentioned in the auction notice. Document submission, including eligibility declaration, must be done as specified. Eligibility verification of the highest bidder is to be done within 3 days of the auction in consultation with the Stakeholder Consultation Committee (SCC).
• Final Report: The fiilinf of the final report, including Form H, with the Adjudicating Authority is mandatory when a scheme of compromise or arrangement under Section 230 of the Companies Act, 2013, is approved.
• Unclaimed Capital: Voluntary Liquidation processes can now be completed even if there is uncalled capital since the provisions for realization of contribution may only result in avoidable delays.
• E-forms: Insolvency Professionals are now required to submit the details related to liquidation and voluntary liquidation processes in the electronic forms available on IBBI’s portal as per the timelines stipulated against each Form. A late fee of Rs.500 shall be payable per form per month of delay. Failure to file the forms, inaccurate information, or delay may result in appropriate action by the Board, including refusal to issue or renew authorization for assignment. IBBI, through a circular in July 2024, mandated the filing of forms on an electronic portal.
• Tax Deductions: Tax deductions to be disclosed by the liquidator before depositing unclaimed dividends and undistributed proceeds into the Liquidation Accounts.
• Liquidation Accounts: It has now been expressly allowed to operate and manage the corporate liquidation account (CLA) in a separate bank account with a scheduled bank and do away with the requirement of having the CLA within the Public Accounts of India (PAI). Liquidators are often left with the proceeds during the liquidation process as they are unable to distribute them to some of the stakeholders due to the unavailability of requisite details, which delays the process. To facilitate the closure in such cases, the IBBI had opened a corporate liquidation account to deposit such undistributed amounts.