Insolvency and Bankruptcy Board of India (Liquidation Process) (Amendment) Regulations, 2020

The Insolvency and Bankruptcy Board of India has introduced the below mentioned amendments to The Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016 and notified the same as the Insolvency and Bankruptcy Board of India (Liquidation Process) (Amendment) Regulations, 2020 on January 6.

• Bar ineligible persons from being a party to the Scheme- A person, who is not eligible under Insolvency and Bankruptcy Code, 2016 (IBC) to submit a resolution plan for insolvency resolution of a corporate debtor, shall not be a party in any manner to a compromise or arrangement of the corporate debtor under section 230 of the Companies Act, 2013.
• A secured creditor cannot sell or transfer an asset, which is subject to security interest, to any person, who is not eligible under IBC to submit a resolution plan for insolvency resolution of the corporate debtor.
• Secured Creditors Subject to Time lines- A secured creditor, who proceeds to realise its security interest, shall contribute its share of the insolvency resolution process cost, liquidation process cost and workmen’s dues, within 90 days of the liquidation commencement date. Such a creditor shall also pay excess of realised value of the asset, which is subject to security interest, over the amount of its claims admitted, within 180 days of the liquidation commencement date. Where the secured creditor fails to pay such amounts to the Liquidator within 90 days or 180 days, as the case may be, the asset shall become part of Liquidation Estate.
• Creation of Corporate Liquidation Account- The Amendment Regulation substitutes regulation 46 to provide for creation of a Corporate Liquidation Account, to be maintained and operated by IBBI in the Public Accounts of India. The Amendment provides that a liquidator shall deposit the amount of unclaimed dividends, if any, and undistributed proceeds, if any, in a liquidation process along with any income earned thereon till the date of deposit into the Corporate Liquidation Account before making an application for dissolution
• The Amendment also lays down a process for a stakeholder to seek withdrawal from the Corporate Liquidation Account.