Liquidation Process of company and Model Timeline of Liquidation Process under IBC, 2016
The Insolvency and Bankruptcy Code, 2016 (IBC, 2016) provides for a time-bound process to resolve insolvency of the corporate debtor within a period of 180 days and one time extension of 90 days from date of the order passed by the Hon’ble National Company Law Tribunal (NCLT). The Hon’ble NCLT appoints an Insolvency Professional as Interim Resolution Professional. The Committee of Creditors (COC) may regularize Interim Resolution Professional as Resolution Professional or appoint another Insolvency Professional as Resolution Professional in the first meeting of the Committee of Creditors.
If the insolvency of the Corporate Debtor cannot get resolved then the liquidation process will initiate as per Section 33 of the IBC, 2016. The liquidation process may initiate in the following cases:
- When Resolution plan has not been received within maximum period allowed for revival (180 days + 90 days extension, if applicable) or the Adjudicating Authority rejects the resolution plan; or
- When any time during the CIRP, the Resolution Professional intimates to the Adjudicating Authority for liquidation of the Corporate Debtor (approved by the CoC by not less than 66 % of the voting shares); or
- When Resolution Plan approved by the Adjudicating Authority, but terms & conditions of Resolution Plan has been contravened by the Corporate Debtor then any person affected by such contravention may apply to Adjudicating Authority for a liquidation order.
When the liquidation order passed by the Adjudicating Authority, the liquidator appointed by the Adjudicating Authority shall initiate the liquidation process of the Corporate Debtor as per provisions of the IBC, 2016 and the IBBI (Liquidation Process) Regulations, 2016.
The date of passing the order of liquidation by the Adjudicating Authority will be the Liquidation commencement date. All the compliances under the code and regulations commence from the liquidation commencement date.
STEPS INVOLVED IN LIQUIDATION PROCESS
STEP-I: Appointment of liquidator and consequences
SREP-II: Public announcement of liquidation commencement, calling for submission of claims [fresh claims to be invited under liquidation process in the respective forms for each category of creditors as per Schedule II of the IBBI(Liquidation Process) Regulations, 2016] and appointment of valuers [if the liquidation value given under Regulation 35 of the IBBI (Corporate Insolvency Resolution Process for Corporate Persons) Regulations, 2016 is not satisfactory]
STEP-III: – Verification and Acceptance of claims
– Constitution of Stakeholders’ Consultation Committee
– Preparation of Asset Memorandum and other reports
STEP-IV: Formation of liquidation estate
STEP-V: Sale of Assets as per Schedule I of the IBBI (Liquidation Process) Regulations, 2016
STEP-VI: Distribution of assets as per waterfall under section 53 of the IBC, 2016
STEP-VII: Dissolution of the Corporate Debtor (to be completed within 1 year from the liquidation commencement date)
TIMELINE FOR COMPLIANCE AS PER THE CODE AND THE IBBI (LIQUIDATION PROCESS) REGULATIONS, 2016
The following Table presents a model timeline of liquidation process of a corporate debtor from the liquidation commencement date.
Model Timeline for liquidation process
| S.
No. |
Section / Regulation | Description of Task | Norm | Latest Timeline (Days) |
| 1 | Form no. IP-1 | Consent to accept assignment as Liquidator, the details of IP and the Applicant, the details of the person which will undergo the process, terms of consent, terms of engagement etc. | Within 3 days of written consent by IP as Liquidator | |
| 2 | Section 33 and
34 |
Commencement of liquidation and
appointment of liquidator |
LCD | 0 = T |
| 3 | Section 33(1)(b)(ii) / Reg. 12 (1, 2, 3) | Public announcement in Form B | Within 5 days of appointment of liquidator. | T + 5 |
| 4 | Reg. 35 (2) | Appointment of registered valuers | Within 7 days of LCD | T + 7 |
| 5 | Form no. CIRP-5 | This includes updated list of claimants; updated CoC; details of the resolution applicants; details of resolution plan received; details of approval or rejection of resolution plan by CoC; application filed with AA for approval of resolution plan; details of resolution plan approved by the AA; initiation of liquidation; expenses incurred on or by the RP; appointment of professionals and the terms of appointment; relationship of the RP with the CD, Financial Creditors and Professionals; support services taken from IPE; non-compliances with the provisions of the Code and other laws applicable to the CD etc. | Within 7 days of LCD | T + 7 |
| 6 | Form no. INC-28 | Intimation to ROC about initiation of Liquidation Process | Within 30 days of LCD | T + 30 |
| 7 | Section 38 (1) and (5), Reg. 17, 18 and 21A | Submission of claims; | Within 30 days of LCD | T + 30 |
| Intimation of decision on relinquishment of security interest | ||||
| 8 | Section 38 (5) | Withdrawal/ modification of claim | Within 14 days of submission of claim | T + 44 |
| 9 | Reg. 30 | Verification of claims received under regulation 12(2)(b) | Within 30 days from the last date for receipt of claims | T + 60 |
| 10 | Reg. 31A | Constitution of SCC | Within 60 days of LCD | T + 60 |
| 11 | Section 40 (2) | Intimation about decision of acceptance/ rejection of claim | Within 7 days of admission or rejection of claim | T + 67 |
| 12 | Reg. 31 (2) | Filing the list of stakeholders and announcement to public | Within 45 days from the last date of receipt of claims | T + 75 |
| 13 | Section 42 | Appeal by a creditor against the decision of the liquidator | Within 14 days of receipt of such decision | T + 81 |
| 14 | Reg. 13 | Preliminary report to the AA | Within 75 days of LCD | T + 75 |
| 15 | Reg. 34 | Asset memorandum | Within 75 days of LCD | T + 75 |
| 16 | Reg. 15 (1), (2),
(3), (4) and (5), and 36 |
Submission of progress reports to AA;
Asset Sale report to be enclosed with every Progress Report, if sales are made |
First progress report | Q1 + 15 |
| Q-2 | Q2 + 15 | |||
| Q-3 | Q3 + 15 | |||
| Q-4 | Q4 + 15 | |||
| FY: 1 Audited accounts of liquidator’s receipt & payments for the financial year | 15th April | |||
| 17 | Proviso to Reg. 15 (1) | Progress report in case of cessation of liquidator | Within 15 days of cessation as liquidator | Date of cessation
+ 15 |
| 18 | Reg. 37 (2, 3) | Information to secured creditors | Within 21 days of receipt of intimation from secured creditor | Date of intimation
+ 21 |
| 19 | Reg. 42 (2) | Distribution of the proceeds to the stakeholders | Within 90 days from the receipt of amount | Date of Realisation
+ 90 |
| 20 | Reg.10 (1) | Application to AA for Disclaimer of onerous
property |
Within 6 months from the LCD | T + 6
months |
| 21 | Reg.10 (3) | Notice to persons interested in the onerous
property or contract |
At least 7 days before making an
Application to AA for disclosure. |
|
| 22 | Reg. 44 | Liquidation of corporate debtor. | Within one year | T + 365 |
| 23 | Reg. 46 | Apply to AA for order on unclaimed proceeds of liquidation or undistributed assets. | Before dissolution order | |
| 24 | Sch-1 Sl. No 12 | Time period to H1 bidder to provide balance sale consideration | Within 90 days of the date of invitation to provide the balance amount. |
Abbreviations:
AA- Adjudicating Authority
CD- Corporate Debtor
CIRP- Corporate Insolvency Resolution Process
CoC- Committee of Creditors
IBC- Insolvency and Bankruptcy Code
IBBI- Insolvency and Bankruptcy Board of India
LCD- Liquidation Commencement Date
NCLT- National Company Law Tribunal
ROC- Registrar of Companies
SCC- Stakeholders’ Consultation Committee
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Author Bio
Thank you for this article sir, can you please clear on more doubts..when Insolvancy professional got appointed as liquidator by NCLT do liquidator need to give their consent to NCLT.
Right presentation, but my question is can CD at Liquidation Process has option to take the process via Company Act 2013, Section 230 or it will remain under opinion of Liquidator /subsequently permission from NCLT for finalization of the process?
Any reply will be appreciated
THIS IS A GREAT ARTICLE ALL THE DETAILS ARE SUMMARISED IN A SINGLE ARTICLE
GREAT WORK CS SHWETA SHARMA 👍