Introduction: The Insolvency and Bankruptcy Board of India (IBBI) has issued Circular No. IBBI/LIQ/67/2024 on 13th February, 2024, addressing crucial aspects related to the voluntary liquidation process, specifically focusing on compliance requirements for financial service providers (FSPs). This circular is directed towards all registered insolvency professionals, recognised insolvency professional entities, and registered insolvency professional agencies. Let’s delve into the details of the circular and its implications.
1. Scope of Voluntary Liquidation: The circular emphasizes the provisions of the Insolvency and Bankruptcy Code (IBC) related to the voluntary liquidation process for corporate persons. Notably, the definition of ‘corporate person’ excludes financial service providers (FSPs). Section 227, coupled with the Insolvency and Bankruptcy (Insolvency and Liquidation Proceedings of Financial Service Providers and Application to Adjudicating Authority) Rules, 2019, allows FSPs to undergo voluntary liquidation only after notification and obtaining prior permission from the appropriate regulator.
2. Non-compliance Concerns: IBBI has observed instances where FSPs initiate voluntary liquidation without the necessary notification and prior permission from the appropriate financial regulator. In response to this, the circular mandates that the liquidator must explicitly declare the notification of the financial service provider category by the Central Government and confirm obtaining prior permission from the appropriate regulator.
3. Reporting Requirements: The circular outlines reporting requirements for liquidators handling the voluntary liquidation of FSPs. Liquidators are directed to submit a copy of Form H, the final report submitted before the Adjudicating Authority per Regulation 38, and the order for dissolution to IBBI. Submissions should be made to the designated email ID: email@example.com.
4. Legal Authority: The circular is issued under the powers conferred by section 196 of the Insolvency and Bankruptcy Code, 2016, indicating its legal backing and significance.
Conclusion: IBBI’s Circular No. IBBI/LIQ/67/2024 underscores the importance of compliance in the voluntary liquidation process, particularly for financial service providers. The directive to declare notification and seek prior permission from the appropriate regulator aims to bring transparency and adherence to regulatory procedures. Liquidators must diligently fulfill the reporting requirements outlined in the circular, ensuring a seamless and lawful voluntary liquidation process. Stakeholders involved in the voluntary liquidation of financial service providers should thoroughly review the circular to align with the prescribed directives from IBBI.
Insolvency and Bankruptcy Board of India
7th Floor, Mayur Bhawan, Connaught Place, New Delhi-110001
Circular No. IBBI/LIQ/67/2024 Dated: 13th February, 2024
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)
Sub: Reporting/Sharing of information in the Voluntary Liquidation process Compliances for initiation of Voluntary Liquidation of a Financial Service Provider
1. The Code provides for the voluntary liquidation process of corporate persons. However, the definition of ‘corporate person’ in sub-section (7) of section 3 excludes any financial service provider (FSP). Section 227 read with the Insolvency and Bankruptcy (Insolvency and Liquidation Proceedings of Financial Service Providers and Application to Adjudicating Authority) Rules, 2019 allows FSPs who have been notified by the Central Government, after consulting financial regulators, to undergo a voluntary liquidation process after obtaining prior permission of the appropriate regulator. It has been noted that some FSPs have commenced the voluntary liquidation process without notification and / or prior permission of the appropriate financial regulator.
2. Accordingly, it is hereby directed that the liquidator shall ensure that, if the corporate person falls under the category of financial service provider, it shall declare that:
(i) the category of Financial Service Providers has been notified by the Central Government under section 227 of the Code, and
(ii) the corporate person has obtained prior permission from the appropriate regulator.
Sharing of final report, Form H, and dissolution order with IBBI
3. It is hereby directed that the liquidator shall submit a copy of Form H and the final report filed before the Adjudicating Authority as per Regulation 38, and the order for dissolution to the Board to the email ID: firstname.lastname@example.org .
4. This is issued in the exercise of the powers conferred under section 196 of the Insolvency and Bankruptcy Code, 2016.