IBBI (Insolvency and Bankruptcy Board of India)

Insolvency and Bankruptcy Board of India (IBBI) is the regulatory authority established under the Insolvency and Bankruptcy Code, 2016 (IBC) to oversee and implement the insolvency and bankruptcy laws in India. It ensures a time-bound resolution of insolvency for companies, LLPs, and individuals. The IBBI regulates insolvency professionals, insolvency professional agencies, and information utilities. It aims to promote transparency, accountability, and investor confidence in the insolvency process. The IBBI also frames rules, conducts inspections, and ensures the fair conduct of proceedings. Its creation marked a significant step towards strengthening India’s financial and credit ecosystem through structured resolution mechanisms.

Key Provisions:

  • Initiation: Such a scheme can be proposed only if recommended by the Committee of Creditors (CoC) during the Corporate Insolvency Resolution Process (CIRP).

  • Timeline: The liquidator must file the proposal within 30 days from the liquidation commencement date.

  • Exclusion from Liquidation Period: The time taken to complete the compromise or arrangement, not exceeding 90 days, is excluded from the overall liquidation timeline.

This amendment aims to maximize value for stakeholders by exploring viable restructuring options before proceeding with asset liquidation.

Mandatory Electronic Filing of Forms:

Mandatory Electronic Filing of Forms refers to the legal requirement for companies and stakeholders to submit statutory forms, returns, and documents electronically through the Ministry of Corporate Affairs (MCA) portal instead of physical submission. This system has been made mandatory under the Companies Act, 2013, to enhance transparency, efficiency, accuracy, and compliance.

Key Points:

  1. Legal Backing: Section 398 of the Companies Act, 2013 empowers the Central Government to mandate electronic filing.

  2. MCA21 Portal: All filings must be submitted through the MCA21 portal using Digital Signature Certificates (DSCs).

  3. E-Forms: Common forms include INC-22, DIR-3 KYC, MGT-7, AOC-4, PAS-3, etc.

  4. Time-bound Compliance: Forms must be filed within stipulated time limits to avoid penalties.

  5. Authentication: All electronic forms must be digitally signed by authorized directors, professionals, or company secretaries.

  6. Benefits: Reduces paperwork, speeds up processing, improves recordkeeping, and enhances government monitoring.

Establishment of Corporate Liquidation Account:

Corporate Liquidation Account is a special account established by the Insolvency and Bankruptcy Board of India (IBBI) under Regulation 46 of the IBBI (Liquidation Process) Regulations, 2016. It is used during the liquidation process of a corporate debtor, where unclaimed dividends and undistributed proceeds from the liquidation are deposited by the liquidator.

Purpose:

  • To hold unclaimed proceeds (e.g., unpaid creditors, shareholders).

  • To ensure transparency and proper tracking of funds.

  • To provide a centralized repository for unclaimed amounts post-liquidation.

Key Features:

Feature Description
Maintained by Insolvency and Bankruptcy Board of India (IBBI)
Under Regulation Regulation 46 of IBBI (Liquidation Process) Regulations, 2016
Deposits Made By Liquidator of the company under liquidation
When Deposited Before submitting the final report if amounts remain unclaimed or undistributed
Types of Amounts Unclaimed dividends, sale proceeds, other undistributed assets
Deadline Prior to the dissolution of the company
Penalty for Non-Compliance Interest at 12% p.a. on the untransferred amount

Revised Auction Timelines and Procedures:

To improve efficiency, transparency, and value realization in the liquidation process, the Insolvency and Bankruptcy Board of India (IBBI) has revised the auction timelines and procedures through amendments to the IBBI (Liquidation Process) Regulations, 2016.

Key Highlights of Revised Auction Process:

Aspect Revised Guidelines
Timeline for First Auction The liquidator must conduct the first auction within 30 days of the liquidation commencement date.
Auction Notice Must be published at least 14 days before the auction, including complete asset details.
Marketing of Auction Liquidators must actively market assets via multiple platforms to attract wider interest.
Reserve Price Fixed based on registered valuer’s valuation; can be reduced by up to 25% in subsequent auctions.
Successive Auctions Must be conducted at intervals not exceeding 30 days, if the previous auction fails.
Earnest Money Deposit (EMD) Bidders are required to deposit EMD as specified; forfeited on default.
Bidding Process Can be online or offline, with real-time tracking and digital authentication.
Successful Bidder Timeline Must pay the total sale consideration within 90 days, with interest for delays beyond 30 days.
Failure to Pay If the bidder defaults, the liquidator may forfeit EMD and conduct a fresh auction.

Objectives of the Revised Timelines and Procedures:

  1. Speed Up Liquidation: Avoid unnecessary delays and maximize value realization.

  2. Increase Transparency: Clearly defined timelines reduce ambiguity.

  3. Enhance Market Participation: Encourages wider bidder participation through improved visibility.

  4. Ensure Compliance: Aligns liquidation with the IBC’s goal of time-bound resolution.

  5. Improve Value Discovery: Repeated auctions with adjusted reserve prices help attract better bids.

Stricter Eligibility Verification for Bidders:

To uphold the integrity and transparency of the liquidation process, the Insolvency and Bankruptcy Board of India (IBBI) has introduced stricter eligibility verification norms for bidders. These reforms aim to ensure that only genuine, capable, and compliant entities participate in the bidding and acquisition of distressed assets.

Key Provisions for Stricter Eligibility Verification:

Aspect Details
Section 29A Compliance Bidders must not be disqualified under Section 29A of IBC (e.g., wilful defaulters, NPA promoters).
Affidavit Requirement Every bidder must submit a sworn affidavit affirming their eligibility under IBC laws.
Due Diligence by Liquidator The liquidator must conduct a thorough verification of bidder credentials and declarations.
KYC & Legal Checks Bidders must provide valid documents for KYC, corporate details, and beneficial ownership.
No Conviction Record Entities or individuals convicted for any offence punishable with imprisonment for 2+ years are ineligible.
Financial Capability Proof Bidders may be asked to furnish bank statements, net worth certificates, or credit reports.
Disclosure of Group Entities Bidders must declare if any of their group entities are related parties or disqualified under Section 29A.
Bid Rejection Grounds Misrepresentation, concealment of facts, or false affidavits may lead to rejection or legal action.

Objectives of Stricter Eligibility Checks:

  1. Prevent Unqualified Bidders: Keeps ineligible promoters and defaulters from regaining control.

  2. Maintain Fairness: Ensures a level playing field for all compliant and serious participants.

  3. Protect Stakeholder Interests: Reduces the risk of failed transactions and protects creditors’ value.

  4. Improve Process Integrity: Builds trust and accountability in the resolution and liquidation process.

  5. Avoid Future Defaults: Prevents transfer of assets to entities with a poor track record or bad governance.

Impact on the Process:

  • Higher Entry Standards → Fewer but more serious and credible bidders.

  • Enhanced Legal Compliance → Liquidators and bidders must adhere to stricter documentary protocols.

  • Smoother Liquidation → Lowers the risk of post-auction disputes or deal cancellations.

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