The new amendments, which came into force on October 14, 2025, aim to streamline the liquidation process, reduce legal uncertainty, and potentially enable faster resolution of cases.

Importantly, the amendments apply prospectively. Ongoing cases where liquidation by sale as a going concern has already begun will remain unaffected.

The option to sell the corporate debtor as a going concern was first introduced in 2018. Since then, the framework has undergone several changes. However, following recent deliberations, it has now been recognised as a hindrance to the liquidation process and is therefore discontinued.

The Case for Ending Going Concern Sales

The IBBI, through its February 2025 discussion paper, proposed removing the provisions relating to the sale of a corporate debtor as a going concern. The following key concerns were highlighted:

• Contradiction with the Scheme of IBC: Liquidation under the Insolvency and Bankruptcy Code, 2016, represents the final stage after resolution efforts under the Corporate Insolvency Resolution Process (CIRP) fail. Allowing a sale of the corporate debtor as a going concern during the liquidation process is contrary to the legal concept of liquidation, which envisages dissolution of the corporate debtor as an end point of the liquidation process.
• Delays and Reduced Efficiency: Attempts to revive a corporate debtor after a liquidation order being passed lead to delays and undermine the time-bound nature of the CIRP.
• Low Recovery Outcomes: Data shows that creditors during the liquidation process recovered only 2.4% through going concern sales (approximately 75% of liquidation value), compared to 3.7% through regular dissolutions (around 101% of liquidation value), indicating no additional value preservation benefit.
• Higher Costs and Legal Disputes: Maintaining the debtor as a going concern during liquidation escalated costs, led to frequent requests for relief from the Adjudicating Authority not contemplated in the Code, and resulted in prolonged legal disputes.
• Auction Inefficiencies: Publicly known reserve prices led to strategic bidding delays and lower realisations, often below liquidation value.
• Non-Viable Businesses Kept Alive: There are several instances wherein going concern sales have been pursued by liquidators in consultation with the stakeholders’ consultation committee, comprising of creditors, even when the corporate debtor was no longer viable, thereby causing further delays and lower recoveries.

New Amendments at a Glance

Changes to Liquidation Process Regulations

• Clause (f) in Sub-Regulation (1) of Regulation 31A omitted: This clause dealt with seeking the advice of the stakeholders’ consultation committee on reviewing the marketing strategy when the sale of the corporate debtor as a going concern failed.

• Clauses (e) and (f) in Regulation 32 omitted: These clauses, which allowed the sale of the corporate debtor or its business as a going concern, have been omitted. The amended Regulation 32 now allows the liquidator to sell:
  • an asset on a standalone basis;
  • the assets in a slump sale;
  • a set of assets collectively; or
  • the assets in parcels.

• Regulation 32A omitted: This provision dealt with the liquidator’s endeavour to first sell under Clauses (e) or (f) of Regulation 32, on the committee of creditors’ recommendation or on the liquidator forming an opinion that such a sale would maximise the corporate debtor’s value. It also covered the identification and grouping of assets and liabilities for sale as a going concern, seeking the consultation committee’s advice on running the corporate debtor as a going concern, and other related matters.

Changes to CIRP Regulations

• Regulation 39C omitted: Earlier, this allowed the committee of creditors to recommend that the liquidator first explore the sale of the corporate debtor or its business as a going concern if liquidation was ordered under Section 33 of the Code.

• Clause (b) in Regulation 39D omitted: The liquidator’s fee will no longer cover the period used for sale under Clauses (e) and (f) of Regulation 32 of the Liquidation Process Regulations.

• Point (b) in Para 15 of Form H omitted: As the option of selling the corporate debtor or its business as a going concern has been removed, the committee’s recommendation on the same need not be mentioned in the compliance certificate (Form H) filed with the Adjudicating Authority.

Comments

The Companies Act, 1956, and thereafter the Companies Act, 2013, both contemplate that liquidation of a company would involve the sale of its assets, distribution of the proceeds made from the sale of such assets to creditors of the said company and ultimate dissolution of the company. The aforesaid structure of liquidation was a time-tested model and lasted for several decades.

The Insolvency and Bankruptcy Code, 2016, has two principal regulations for the insolvency of companies/corporate debtors. The insolvency process is initiated under the CIRP Regulations, wherein the primary object is to resolve and/or revive the corporate debtor by transferring the same to a third-party capable and enterprising entrepreneur/person/entity who is unrelated to the promoters and/or suspended board of directors of the corporate debtor. The said Regulations also stress on completion of the CIRP in a time-bound manner and maximisation of value through negotiation, scrutiny, approval and sanction of resolution plans involving takeover and/or acquisition of the corporate debtor as a going concern.

In the event no successful resolution is possible under the CIRP Regulations, the creditors initiate liquidation under the Liquidation Process Regulations. It is the amendments made to the liquidation regulations which ensure that no further time is wasted on the sale of assets, leading to dissolution of the corporate debtor and that once liquidation commences, closure of such liquidation process is achieved at a lower cost and with greater efficacy. The aforesaid amendments would also maximise value during either of the processes as aforesaid (CIRP and liquidation), since prospective bidders who are interested in buying the corporate debtor as a going concern would clearly be aware that their only chance to do so would be by submission of a valid and viable resolution plan during CIRP under the CIRP Regulations. Upon conclusion of the CIRP, once the liquidation process commences, dissolution of the corporate debtor is inevitable.