Entrusting the reins of the liquidation process to the Committee of Creditors 

The omission of Regulation 31A relating to the Stakeholder Consultation Committee (SCC) and the substitution of Regulation 8 mark a significant change by substituting the CoC in place of the SCC. Therefore, the opportunity for workmen, employees, governmental authorities, operational creditors, shareholders, and partners to advise the liquidator has been abrogated, and the reins of the liquidation process have been given to the CoC.

Under the current amended regime, the CoC constituted during the Corporate Insolvency Resolution Process (CIRP) under Section 21 of the Insolvency and Bankruptcy Code, 2016 (Code), shall continue during the liquidation stage. The continuing CoC has also been empowered to supervise the conduct of the liquidation process by the liquidator. Further, Section 24 of the Code, which prescribes the procedure for the conduct of CoC meetings, has been made applicable to the liquidation process.

The amendment introduces a shift from the era of all stakeholders advising the liquidator to the continuance of focused and greater control by the CoC for the purpose of supervising the liquidator during liquidation and, in effect, administering the commercial aspects of liquidation by taking decisions in CoC meetings.

Pursuant to the amendment in the Code on 6th April, 2026, Section 34(4) was substituted, which now envisages that an insolvency professional appointed as a resolution professional for the Corporate Insolvency Resolution Process under Chapter II shall not be appointed or replaced as the liquidator for the liquidation process of such corporate debtor.

Further, the introduction of Regulation 8B under the amended framework marks a significant development. The provision empowers the CoC to replace the liquidator, provided that a resolution is passed with the approval of not less than sixty-six percent of the voting share. Upon such approval, the committee is entitled to file the necessary application before the appropriate authority for effecting the replacement.

These changes strengthen the position of the CoC by granting it a more active and decisive role in the liquidation process. At the same time, they enhance the accountability of the liquidator, ensuring that the liquidator’s conduct remains aligned with the expectations and interests of the stakeholders.

Who contributes to liquidation costs?

While the pre-amendment regulations placed the responsibility on financial creditors, being financial institutions, to bear any excess of liquidation costs over the available liquid assets of the corporate debtor, the amended framework takes a more expansive approach. It now empowers the liquidator to call upon the “members of the committee” to contribute towards such shortfall.

This seemingly small change in terminology has significant implications. By using the broader expression “members of the committee,” the regulation appears to extend the scope of contributing members beyond just institutional financial creditors to include all financial creditors, regardless of whether they are large financial institutions or individual lenders. As a result, every financial creditor who is part of the committee may be called upon to contribute to the deficit in liquidation costs in proportion to the financial debt owed to them.

Timeline

The current amendment to the Liquidation Regulations tightens the overall timelines in the liquidation process to T+180 days instead of T+365 days under the pre-amendment Liquidation Regulations. Such tightening of the timelines has been introduced to preserve value and bring greater time discipline to the liquidation process.

Liquidator’s fee

In the pre-amendment regime under Regulation 4, the liquidator, apart from the fees fixed by the SCC, was entitled to receive a percentage of the amount realized from the assets of the corporate debtor (exclusive of liquidation costs), as well as an amount on the distribution of such realized amount to the stakeholders.

Under the amended framework, the newly substituted Regulation 4 envisages that the CoC may fix the fee of the liquidator after the appointment of the liquidator during the liquidation process. In the event that the committee does not fix the fee of the liquidator, the liquidator shall be entitled to a fee calculated as a prescribed percentage of the amount distributed to the stakeholders.

The said amendment links the liquidator’s fee to the performance of the distribution of the realized amount to the stakeholders, which also aligns the liquidator’s fee with stakeholders’ payouts. Be that as it may, the explanation to the amended Liquidation Regulations clarifies that the requirements of this regulation shall apply to liquidation processes commencing on or after the date of commencement of the Insolvency and Bankruptcy Board of India (Liquidation Process) (Fourth Amendment) Regulations, 2026.

Ambiguity in the treatment of going concern costs by omission of Regulation 2(1)(ea) 

Prior to the amendment, liquidation costs under Regulation 2(1)(ea)(v) included costs incurred by the liquidator in carrying on the business of the corporate debtor as a going concern. The current amendment omitted the said clause, thereby indicating that the costs incurred by the liquidator in carrying on the business of the corporate debtor as a going concern would no longer form part of “liquidation costs.”

Although the amendment aims to promote a more efficient, time-bound, and robust liquidation process, it does not eliminate certain ambiguities. One key area of concern is the treatment of expenses incurred by the liquidator while maintaining the corporate debtor as a going concern during liquidation. Notably, these expenses have not been explicitly included within the scope of “liquidation costs.”

This lack of inclusion creates uncertainty regarding how such expenses are to be classified and, more importantly, how they will be prioritized in the distribution of proceeds. Since liquidation costs generally enjoy a higher priority in repayment, the absence of clarity on whether going concern expenses fall within this category may lead to confusion, inconsistent practices, and potential disputes among stakeholders.

Moreover, this ambiguity may have practical consequences for the liquidation process itself. If financial creditors are unsure whether these costs will be adequately recognized or given priority, they may be reluctant to continue operating the corporate debtor as a going concern. The current approach in the amendment, read with Regulation 32 in reference to the corporate debtor being run as a going concern, seems to indicate that the CoC and the liquidator are being discouraged from continuing to run the corporate debtor as a going concern.

Waiver of fresh claim submission where claims have been previously submitted 

The current amendment to Regulation 16 significantly simplifies the process of claim submission during liquidation. It provides that creditors who have already submitted their claims during the CIRP are not required to file their claims again, which removes unnecessary duplication and ensures continuity, as the claims admitted during the CIRP can be seamlessly carried forward into the liquidation stage.

At the same time, the amendment accommodates those creditors who may have failed to submit their claims during the CIRP. Such creditors are now given an additional opportunity to file their claims with the liquidator within fourteen days from the liquidation commencement date.

A notable and somewhat critical aspect of this amendment relates to the treatment of interest on claims. The regulation clarifies that interest is to be calculated only up to the insolvency commencement date and not beyond it. This effectively limits the total value of claims, particularly for financial creditors, and may impact their overall recovery. The introduction of this clarification is significant, but it also raises concerns regarding its implications for creditor rights and expectations.

The amendment further requires creditors to update their claims if the outstanding amount has been satisfied, either partly or fully, from any source after the insolvency commencement date. This ensures that the claims recorded in the liquidation process accurately reflect the real financial position, thereby avoiding overstatement or duplication of dues.

Strengthening the process of sale of assets during liquidation

Prior to the amendment, the liquidator enjoyed considerable discretion in the sale of assets of the corporate debtor, with minimal procedural restrictions, which also comprised taking advice from the SCC. The amended framework introduces important checks on this discretion by imposing specific restrictions on the liquidator to enhance transparency and prevent potential conflicts of interest.

In particular, the liquidator is now required to obtain prior approval from the Adjudicating Authority before selling assets to:

(a) a related party of the corporate debtor;

(b) a related party of the liquidator; or

(c) any professional appointed by the liquidator.

Further, with regard to sales through private sale, the amendment introduces an additional layer of supervision. The amended provisions make it mandatory for the liquidator to obtain prior approval from the CoC, with not less than sixty-six percent of the voting share, before proceeding with such a private sale.

The aforesaid is yet again a shift from the advisory regime of the SCC to a supervisory and CoC-driven regime, which bears similarities to the procedure mandating CoC approval for the disposal of the corporate debtor during the CIRP.

Together, these changes significantly dilute the unilateral powers of the liquidator and promote a system of shared decision-making and accountability vis-à-vis the CoC. The aforesaid procedure clearly avoids and abrogates the unilateral control exercised by the liquidator during the pre-amendment regime, thereby incorporating balance and fairness while enhancing and continuing the CoC’s power to impose and take commercial decisions affecting the creditors.

Asset transfer mechanism in cases of corporate guarantors

The amendment has introduced a new Regulation 8A for facilitating Section 28A of the Code, which provides that where a creditor of the corporate debtor has taken possession of an asset of a corporate guarantor of the corporate debtor by enforcing its security interest over such asset under any law, the creditor may, during the CIRP of the corporate debtor, permit the transfer of such asset as part of its insolvency resolution, subject to prior approval being obtained from the CoC.

In cases where the corporate debtor is a corporate guarantor undergoing liquidation, the liquidator of such a corporate debtor is required to coordinate with the resolution professional of the corporate debtor to whom such a guarantee has been given with regard to the transfer of assets as part of the CIRP of the corporate debtor to whom the said guarantee has been given.

In such cases, the liquidator is also required to obtain approval from the CoC of the corporate debtor that has given the corporate guarantee and is undergoing liquidation for the transfer of assets in the CIRP of the corporate debtor to whom such guarantee has been given.

Where approval as aforesaid is granted by the CoC of the corporate debtor’s guarantor permitting such transfer of assets, the liquidator shall ensure disclosure of the proposed transfer in the progress report and the asset memorandum.

The aforesaid provision creates an interplay between the assets of a guarantor corporate debtor undergoing liquidation and the corporate debtor undergoing CIRP to which the corporate guarantee has been provided for the purpose of value maximization for the creditors wherever possible.