The Insolvency and Bankruptcy Board of India notified the Insolvency and Bankruptcy Board of India (Liquidation Process) (Second Amendment) Regulations, 2022 (‘Amendment Liquidation Regulations’) and Insolvency and Bankruptcy Board of India (Voluntary Liquidation Process) (Second Amendment) Regulations, 2022 (‘Amendment Voluntary Liquidation Regulations’) on 16^th September, 2022.

To enable better participation of stakeholders and streamline the liquidation process to reduce delays and realise better value, the amendment in Liquidation Regulations make the following major modifications:

• The Committee of Creditors (CoC) constituted during Corporate Insolvency Resolution Process (CIRP) shall function as Stakeholders Consultation Committee (SCC) in the first 60 days. After adjudication of claims and within 60 days of initiation of process, the SCC shall be reconstituted based upon admitted claims.
• The liquidator has been mandated to conduct the meetings of SCC in a structured and time bound manner with better participation of stakeholders.
• The scope of mandatory consultation by liquidator, with SCC has been enlarged. Now, SCC may even propose replacement of liquidator to the Adjudicating Authority (AA) and fix the fees of liquidator, if the CoC did not fix the same during CIRP.
• If any claim is not filed during liquidation process, then the amount of claim collated during CIRP shall be verified by the liquidator.
• Wherever the CoC decides that the process of compromise or arrangement may be explored during liquidation process, the liquidator shall file application only in such cases before Adjudicating Authority for considering the proposal of compromise or arrangement, if any, within thirty days of the order of liquidation.
• Specific event-based timelines have been stipulated for auction process.
• Before filing of an application for dissolution or closure of the process, SCC shall advice the liquidator, the manner in which proceedings in respect of avoidance transactions or fraudulent or wrongful trading, shall be pursued after closure of liquidation proceedings.

The Amendment Liquidation Regulations and Amendment Voluntary Liquidation Regulations further lay down the manner and period of retention of records relating to liquidation and voluntary liquidation of a corporate debtor or corporate person, respectively.

The Amendment Liquidation Regulations and Amendment Voluntary Liquidation Regulations are effective from 16^th September, 2022. These are available at www.mca.gov.in and www.ibbi.gov.in.

Stakeholders Consultation Committee expanded powers to oversee liquidation and recommend liquidator replacement and fee fixation. Amendments require the Committee of Creditors to act as a Stakeholders Consultation Committee for the first 60 days and to be reconstituted based on admitted claims; mandate structured, time bound SCC meetings; allow the SCC to propose liquidator replacement and fix fees if the CoC did not; and oblige the liquidator to verify claims not filed during liquidation against CIRP collated amounts.