TaxTMI 
TaxTMI 
Clarification w.r.t. Liquidators’ fee under clause (b) of sub-regulation (2) of Regulation 4 of IBBI (Liquidation Process) Regulations, 2016
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....rocess) Regulations, 2016 (Liquidation Regulations) provides for Liquidator's fee. Sub-regulation (1) and (1A) provide that the fee payable to the liquidator be decided by the Committee of Creditors (CoC) or Stakeholders' Consultation Committee (SCC), as the case may be. If liquidators' fee is not fixed under sub-regulation (1) and (1A), clause (b) of sub-regulation (2) of Regulation 4 provides that the liquidator shall be entitled to a fee as a percentage of the amount realised net of other liquidation costs, and of the amount distributed, for the balance period of liquidation, as under: Amount of Realisation / Distribution (In rupees) Percentage of fee on the amount realised / distributed in the first six months in the next six....
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....balance including term deposit, mutual fund, quoted share available on start of the process after exploring compromise and arrangement, if any. 2.2 Other liquidation costs: The term "Amount of Realisation (exclusive of liquidation costs)" given in the table in Regulation 4(2)(b) mandates that all liquidation costs are to be deducted from the realisation amount. However, as per regulation 4(2)(b), "other liquidation cost" is to be deducted from realisation. There is a gap in understanding in the market about what components of the liquidation cost are to be excluded from the liquidation cost to derive "other liquidation cost". The component that can be excluded is only that part of the liquidation cost which is itself dependent for its ....
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.... would create uncertainty about the priority of payment of these components of liquidation cost over payment to stakeholders. Furthermore, the term "other liquidation cost" existed right from the inception of liquidation regulations and thus could not have meant to exclude certain components of liquidation costs from "liquidation costs" which were added by a subsequent amendment in 2019. Clarification: The "other liquidation cost" in regulation 4(2)(b) shall mean liquidation cost paid in priority under section 53(1)(a), after excluding the liquidator's fee. 2.3 Amount distributed to stakeholders: Section 53 provides for order of priority for making distribution out of proceeds from sale of assets. Further, Regulation 42 provides that:....
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....mean the value of assets realised during the first six months and then next six months and so on. The words "Amount of Realisation /Distribution" are mentioned in column 1 only. Other columns are for percentage of fees on such realisation/distribution. Thus, the cumulative value of amount realised/ distributed is to be bifurcated in various slabs as per column 1. Only after that, liquidator has to divide the amount realised in a particular slab based on the tenure in which it was realised such as in first six months, next six months or thereafter. Out of the total amount pertaining to that slab, for the amount realised in first six months, % of fees will be as per column 2; for the amount realised in next six months, % of fees will be as pe....
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....various slabs as per column 1. Only after that, the liquidator has to divide the amount realised in a particular slab based on the tenure in which it was realised such as in first six months, next six months or thereafter. Thereafter, fee rate for various amounts realised in various periods are to be taken as per columns 2, 3 and 4. Clarification: "Amount of Realisation /Distribution" shall mean cumulative value of amount realised/ distributed which is to be bifurcated in various slabs as per column 1 and thereafter the same is to be bifurcated into realisation/ distribution in various periods of time and then corresponding fee rate from the table is to be taken. 2.5 Period for calculation of fee: It has been observed that the liquidators....