Asset Sale & Going Concern Rules under IBC Regulations 32 & 32A

The Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016, also called the Liquidation Regulations, set out the rules that must be followed when a company goes into liquidation under the Insolvency and Bankruptcy Code (IBC), 2016. Two of the most important provisions are Regulation 32 and Regulation 32A. These regulations explain how a liquidator can sell the assets of the corporate debtor (the company being liquidated). The sale can be done in different ways—for example:

• Selling the entire company as a going concern (that means the company continues its operations, and the buyer takes over as it is),
• Selling business units or individual assets such as land, machinery, or stock.

The idea behind these rules is to make sure the maximum value is recovered for creditors and to preserve employment and economic activity whenever possible.

Example: Suppose a manufacturing company goes into liquidation. Instead of selling its land, factory, and machines separately, the liquidator may sell the whole company as a going concern under Regulation 32A. This means the buyer can continue running the factory, saving the workers’ jobs and using the existing infrastructure.

On the other hand, if no one wants to buy the company as a whole, the liquidator can sell its individual assets (like machinery, vehicles, or real estate) under Regulation 32 to recover as much value as possible.

Regulation 32 – Manner of Sale of Assets

Regulation 32 specifies the various modes through which a liquidator can sell the assets of a company under liquidation. It provides the liquidator with flexibility to choose the most appropriate and value-maximizing method based on the nature of the assets and the market situation.

The liquidator may sell:

(a) An asset on a standalone basis – selling one single asset, like machinery or land.

(b) The assets in a slump sale – selling all the assets together as one unit (for example, selling the entire factory and all its equipment in one deal).

(c) A set of assets collectively – grouping some related assets together (for example, selling all vehicles together).

(d) The assets in parcels – dividing assets into smaller parts and selling them separately.

(e) The corporate debtor as a going concern – selling the entire company as a running business.

(f) The business(es) of the corporate debtor as a going concern – selling only one or more business units that are still functioning.

Important Rule:

If any of the company’s assets are subject to a security interest, for example, pledged or mortgaged to a bank or financial institution—the liquidator cannot sell those assets unless the secured creditor (lender) agrees to relinquish its security interest and release the asset into the liquidation estate.

This rule ensures that the rights of secured creditors are fully protected and that such assets are not sold without their consent. Only after the lender gives up its charge over the asset can it be included in the liquidation process for sale

Two Going Concern Sales

It is to be noted that there are two going concern sales defined under Regulation 32 of IBBI (Liquidation Process) Regulations, 2016. The first one pertains to Sale of “Corporate Debtor as a going concern” under Regulation 32(e) and sale of “Business of Corporate Debtor as a going concern under Regulation 32(f). 13. In the sale of “Corporate Debtor as a going concern” under Regulation 32(e) of IBBI (Liquidation Process) Regulations, 2016 the Corporate Debtor will not be dissolved. In this part of sale, the entire business, assets and liabilities; including all contracts, licenses, concessions, agreements, benefits, privileges, rights or interests of the Corporate Debtor will be transferred to the acquirer. The existing shares of the Corporate Debtor will not be transferred and shall be extinguished.

In the sale of “Business of Corporate Debtor as a going concern under Regulation 32(f) of IBBI (Liquidation Process) Regulations, 2016, the entire business(s) along with assets and liabilities, including intangibles, will be transferred as going concern to acquire, without transfer of the Corporate debtor and therefore, the Corporate Debtor will be dissolved. The existing shares will be extinguished. The remaining assets, other than those sold as part of business will be sold and the proceeds thereof will be used to meet the claims under Section 53 of IBC, 2016

Sale of a Company as a ‘Going Concern means sale of both assets and liabilities, it is stated on ‘as is where is basis. The Hon ble NCLAT in the matter of M/s. Visisth Services Ltd. Vs. Mr. S. V. Ramani, Liquidator of United Chloro-Paraffins Pvt. Ltd. Company Appeal (AT)(Ins) No. 896 of 2020 held that as per Regulation 32A of the IBBI (Liquidation process) Regulations, 2016 the Sale as a ‘Going Concern’ means sale of assets as well as liabilities and not assets and liabilities. Sale of a Company as a ‘Going Concern’ means sale of both assets and liabilities if it is stated on ‘as is where is basis’.

Regulation 32A – Sale as a Going Concern

Regulation 32A, introduced in 2019, was aimed at promoting the sale of companies as going concerns rather than selling their assets in parts. A sale as a going concern means that the business continues to operate even after the sale, with the buyer taking over all assets and certain liabilities of the company. The buyer also retains the employees, customers, and operational structure, ensuring that the business remains functional and does not shut down.

This approach helps in maintaining business continuity, protecting jobs, and generally maximizing value for creditors, as a running business is often worth more than the sum of its individual assets.

1. Priority to Going Concern Sale

If the Committee of Creditors (CoC) recommends, or the liquidator believes, that selling the company or its business as a going concern will get the best value, then this option must be tried first. Only if this attempt fails can the liquidator move to other sale methods like selling assets individually. [Regulation 32A(1)]

Example: If “XYZ Pharma Pvt. Ltd.” is in liquidation but still producing medicines, it is better to sell the whole business to a new buyer rather than selling just the machines or raw materials.

2. Identification of Assets and Liabilities

According to Regulation 39C of the CIRP Regulations, the CoC can identify which assets and liabilities should be sold together as a going concern. If the CoC has not done this, the liquidator must decide which parts of the company should be sold as a going concern, but only after consulting the consultation committee (a group of stakeholders formed after liquidation starts). This ensures that the process remains fair and transparent. [Regulation 32A(2) & (3)]

3. Exclusive First Auction Clause (Amendment of 2022)

The 2022 amendment to the IBBI (Liquidation Process) Regulations, 2016 brought an important clarification regarding the sale of a company as a going concern. Under this amendment, it was clarified that a going concern sale can be offered only as an exclusive option in the first auction. In simple terms, during the first auction round, the liquidator must focus solely on selling the company as a going concern under Regulation 32(e). [Regulation 32A(4)]

If no buyer expresses interest or the sale as a going concern fails, the liquidator can then move to other sale options—such as selling the company’s assets in parts, in parcels, or through a slump sale.

4. Clarification by the 2024 Amendment

The 2024 amendment to the IBBI (Liquidation Process) Regulations, 2016 further strengthened the rule regarding going concern sales. It clarified that after the first auction, the liquidator cannot offer only the going concern option to buyers. In other words, once the first attempt to sell the company as a going concern fails, the liquidator must open up all other sale options permitted under Regulation 32, such as selling assets in parcels, in a slump sale, or individually.

This amendment was introduced to avoid repeated failed auctions, reduce delays, and ensure the liquidation process is completed efficiently and within reasonable time.

5. Approval for Continuing Operations (2024 Amendment)

The 2024 amendment also introduced a new safeguard related to running the business during liquidation. It provides that if the liquidator wishes to continue operating the business while attempting to sell it as a going concern, he must first consult the

Consultation Committee.

The business can then be run only to the extent and in the manner approved by the committee. This ensures that the liquidator does not make independent decisions that could expose the company to further losses or operational risks during liquidation.

Practical Implications

Together, Regulations 32 and 32A provide a clear step-by-step approach for selling assets during liquidation:

1. First, the liquidator must try to sell the company or its business as a going concern.

2. If that fails (after the first auction or within a set time), the liquidator can sell assets individually, in groups, or in parcels.

3. During this process, the liquidator must consult the consultation committee before taking major decisions like continuing operations.

This ensures fairness, transparency, and maximum recovery for creditors. Importantly, liquidation under these rules does not always mean the company is “dead.” If sold as a going concern, the same company can continue operating under new management, giving it a second life and protecting jobs.

Conclusion

Regulations 32 and 32A of Liquidation Regulations, reflect India’s move toward a more balanced and value-driven insolvency system. They help liquidators get better returns for creditors, save running businesses, and protect employment. The amendments made in 2019, 2022, and 2024 further strengthen these goals by making the process flexible yet accountable. In simple terms, these rules ensure that liquidation is not just about selling assets, it is about giving struggling companies a chance to survive and continue contributing to the economy.

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Disclaimer: Nothing contained in this document is to be construed as a legal opinion or view of either of the author whatsoever and the content is to be used strictly for informational and educational purposes. While due care has been taken in preparing this article, certain mistakes and omissions may creep in. the author does not accept any liability for any loss or damage of any kind arising out of any inaccurate or incomplete information in this document nor for any actions taken in reliance thereon.