The Insolvency and Bankruptcy Board of India (IBBI) notified the Insolvency and Bankruptcy Board of India (Liquidation Process) (Amendment) Regulations, 2020 on 6th January 2020.

The amendment clarifies that a person, who is not eligible under the Code to submit a resolution plan for insolvency resolution of the corporate debtor, shall not be a party in any manner to a compromise or arrangement of the corporate debtor under section 230 of the Companies Act, 2013. It also clarifies that a secured creditor cannot sell or transfer an asset, which is subject to security interest, to any person, who is not eligible under the Code to submit a resolution plan for insolvency resolution of the corporate debtor.

The amendment provides that a secured creditor, who proceeds to realise its security interest, shall contribute its share of the insolvency resolution process cost, liquidation process cost and workmen’s dues, within 90 days of the liquidation commencement date. It shall also pay excess of realised value of the asset, which is subject to security interest, over the amount of its claims admitted, within 180 days of the liquidation commencement date. Where the secured creditor fails to pay such amounts to the Liquidator within 90 days or 180 days, as the case may be, the asset shall become part of Liquidation Estate.

The amendment provides that a Liquidator shall deposit the amount of unclaimed dividends, if any, and undistributed proceeds, if any, in a liquidation process along with any income earned thereon into the Corporate Liquidation Account before he submits an application for dissolution of the corporate debtor. It also provides a process for a stakeholder to seek withdrawal from the Corporate Liquidation Account.

The amended regulations are effective from 6th January 2020. These are available at www.mca.gov.in and www.ibbi.gov.in.

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RM/KMN

Eligibility restrictions for resolution plan proponents bar ineligible persons from compromises and receiving secured assets. Amendments restrict that persons not eligible under the Code to submit resolution plans cannot be parties to compromises under the Companies Act or recipients of secured assets sold or transferred by secured creditors; secured creditors who realise security must pay prescribed shares of insolvency and liquidation costs and remit excess proceeds within specified periods or the asset/proceeds will form part of the Liquidation Estate, and liquidators must deposit unclaimed dividends and undistributed proceeds into the Corporate Liquidation Account with a withdrawal process for stakeholders.