Introduction: The Insolvency and Bankruptcy Board of India (IBBI) is taking significant steps to enhance transparency and stakeholder engagement in the liquidation process. In a recent circular, the board addressed key concerns regarding the dissemination of progress reports and the preparation of preliminary reports. This article delves into the directives issued by IBBI and their implications for the insolvency ecosystem.
Detailed Analysis
1. Progress Reporting and Stakeholder Engagement:
- Regulation 15 of the Liquidation Process Regulations mandates liquidators to submit progress reports to the Adjudicating Authority (AA) and IBBI. However, these reports were not shared with key stakeholders, leading to information asymmetry.
- IBBI’s directive now requires liquidators to share progress reports with members of the Stakeholders’ Consultation Committee (SCC) after receiving a confidential undertaking. This move aims to bridge the gap in information dissemination and foster transparency.
2. Preparation of Preliminary Reports:
- Regulation 13 requires liquidators to submit a Preliminary Report detailing the corporate debtor’s aspects and the intended plan of action. However, the absence of SCC consultation in this process poses the risk of overlooking crucial stakeholder insights.
- IBBI’s directive mandates liquidators to seek suggestions and observations from SCC members during the preparation of the Preliminary Report. This collaborative approach ensures that diverse perspectives are considered, enhancing the quality of the report.
3. Submission of Final Reports and Closure Orders:
- Liquidators are now directed to submit a copy of Form H, along with the final report and the order for process closure/dissolution, to IBBI’s designated email ID.
- This streamlined process facilitates efficient communication between liquidators and IBBI, ensuring compliance with regulatory requirements.
Conclusion: The directives issued by IBBI represent a significant step towards fostering transparency and stakeholder engagement in the liquidation process. By involving key stakeholders such as creditors and SCC members, IBBI aims to address information asymmetry and enhance the efficiency of the insolvency ecosystem. These measures are expected to promote trust and confidence among stakeholders, ultimately contributing to the effectiveness of the insolvency framework in India.
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Insolvency and Bankruptcy Board of India
7th Floor, Mayur Bhawan, Connaught Place, New Delhi-110001
Circular No. IBBI/LIQ/70/2024 Dated: 22nd February, 2024
To
All Registered Insolvency Professionals
All Recognised Insolvency Professional Entities
All Registered Insolvency Professional Agencies
(By mail to registered email addresses and on the website of the IBBI)
Dear Madam/Sir,
Sub: Enhancing Transparency and Stakeholder Engagement in Liquidation Process Circulation of progress reports to stakeholders
1. Regulation 15 of Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016 (Liquidation Regulations) provides that the liquidator shall submit Progress Reports, to the Adjudicating Authority (AA) and the Insolvency and Bankruptcy Board of India (IBBI / Board) within fifteen days after the end of every quarter. Though the regulation provides the submission of progress reports to the AA and the Board, it does not get shared with the key stakeholders of the ecosystem, i.e., creditors, thus leaving them unaware of the progress in the process thereby creating information asymmetry.
2. Accordingly, it is hereby directed that the liquidator shall also share the progress reports with the members of the Stakeholders’ Consultation Committee (SCC) after receiving a confidential undertaking. Further, the liquidator shall submit the progress reports under Regulation 15 till the filing of the final report under Regulation 45.
Preparation of preliminary report
3. Regulation 13 of the Liquidation Regulations mandates the liquidator to submit a Preliminary Report to the AA detailing various aspects of the corporate debtor and the intended plan of action for carrying out the liquidation process. However, the present regulation lacks SCC consultation in preparation of the preliminary report thereby risking oversight of crucial stakeholder insights.
4. Accordingly, it is hereby directed that the liquidator shall seek suggestions / observations of the members of the SCC while preparing the Preliminary Report under regulation 13 and finalise the Preliminary Report after considering such suggestions / observations, and thereafter, submit it to the AA, Board and members of SCC.
Sharing of final report, Form H, and process closure/dissolution order with IBBI
5. It is hereby directed that the liquidator shall submit a copy of Form H along with final report filed before the Adjudicating Authority as per Regulation 45, and the order for process closure/dissolution to the Board to the email ID: [email protected].
6. This is issued in the exercise of the powers conferred under section 196 of the Insolvency and Bankruptcy Code, 2016.
Yours faithfully,
-Sd-
(Rajesh Tiwari)
General Manager
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