Introduction: The Insolvency and Bankruptcy Board of India (IBBI) has issued Circular No. IBBI/LIQ/70/2024 on 22nd February 2024, focusing on enhancing transparency and stakeholder engagement in the liquidation process. The circular addresses key aspects such as sharing progress reports with stakeholders, involving the Stakeholders’ Consultation Committee (SCC) in the preparation of preliminary reports, and submission of essential documents to IBBI.
Detailed Analysis:
1. Circulation of Progress Reports:
- Regulation 15 of the Liquidation Process Regulations requires liquidators to submit progress reports to the Adjudicating Authority (AA) and IBBI every quarter.
- The circular emphasizes sharing progress reports with members of the SCC after obtaining a confidential undertaking. This move aims to bridge the information gap and foster transparency among creditors and other stakeholders.
2. Preparation of Preliminary Report:
- Regulation 13 mandates liquidators to submit a Preliminary Report detailing the corporate debtor and the plan of action for liquidation.
- The circular introduces SCC consultation in the preparation of the Preliminary Report, ensuring that crucial stakeholder insights are considered. Liquidators are directed to seek suggestions/observations from SCC members, finalize the report accordingly, and then submit it to AA, Board, and SCC.
3. Submission of Final Report and Closure Order:
- Liquidators are directed to submit a copy of Form H, the final report filed before the Adjudicating Authority (Regulation 45), and the process closure/dissolution order to IBBI at cirp@ibbi.gov.in. This step aims to centralize crucial information for regulatory oversight.
Conclusion: The IBBI’s circular signifies a significant step towards improving transparency and stakeholder engagement in the liquidation process. By involving the Stakeholders’ Consultation Committee in the preparation of preliminary reports and sharing progress reports, the circular ensures that creditors are well-informed about the progress in the liquidation process. The directive to submit essential documents to IBBI streamlines regulatory oversight, contributing to a more efficient and accountable insolvency framework. Stakeholders, including insolvency professionals, are encouraged to adhere to these guidelines for enhanced collaboration and transparency in the liquidation proceedings.
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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: cirp@ibbi.gov.in.
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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