The Insolvency and Bankruptcy Board of India (IBBI), the regulatory body for Insolvency Professionals and Liquidators has proposed amendments to the law relating to the liquidation process.
Under the Insolvency and Bankruptcy Code, 2016, a corporate person (company) is required to initiate a voluntarily liquidation process after getting approval from its creditors and the National Company Law Tribunal. They are also required to declare that they are not opting for the liquidation process with an intent to defraud anybody. After getting the approval from the creditors and the NCLT, a corporate person can go into the voluntary liquidation process.
But there could be instances where a corporate person initiated the voluntary liquidation process at a time of financial stress and when the prospects were on the downside, and in the meantime, a business opportunity may arise subsequently during the course of time. There is no such provision under the IBC, 2016 that allows a corporate person to withdraw from such voluntary liquidation.
The proposed amendment would require a corporate person to receive approval from its creditors with at least 67% vote to withdraw the voluntary liquidation process in case the sale of the corporate person’s assets has not begun. The withdrawal of voluntary liquidation would require the approval of all its unpaid outstanding creditors in case some of the company’s assets have been sold.
The Insolvency and Bankruptcy Board of India (IBBI) is inviting public comments on the proposed amendment.