Insolvency and Bankruptcy

IBBI 2024 Circular: Unclaimed Dividends Withdrawal under Regulation 46

The IBBI, in its circular No. IBBI/LIQ/69/2024, dated February 22nd, 2024, announced the deposits and withdrawal procedures for the unclaimed dividends and undistributed proceeds in the liquidation process, in accordance the Regulation 46 of Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016 (Liquidation Regulations). This IBBI circular outlines the necessary obligations for the liquidators to deposit unclaimed amounts within the corporate liquidation Account and elaborates the process for the stakeholders to claim such entitlements to receive these funds prior to the dissolution of the corporate debtor. This circular also intended to specify the requirements for forms for such requests, which are issued under the authority of section 196 of the IBC code, 2016.

Key Highlights of this Circular-

Regulation Compliance:

The circular issued by the IBBI dated 22^nd February 2024 specifies the management of unclaimed dividends and undistributed proceeds during the liquidation process, which is duly governed by Regulation 46 of the IBC code, 2016 (Liquidation Process).

Obligations of Liquidators:

IBBI Mandates liquidators to deposit unclaimed amounts into corporate Liquidation Accounts, ensuring transparency and accountability. In accordance with Regulation 46, now the liquidators are obligated with an order to deposit any unclaimed or undistributed amounts into the corporate Liquidation Accounts and inform about the same with the IBBI Board using Form-I, which is specified under the Liquidation Regulations. Such an approach will ensure transparency and accountability in handling such funds under the liquidation proceedings.

Stakeholder Procedure:

IBBI Circular¹ Outlines the process for stakeholders to claim entitlements from the corporate liquidation account before corporate debtor dissolution, including verification and application through specified forms. It mandates and outlines the procedure for the stakeholders who can claim the entitlement to funds deposited into the corporate liquidation account. Under sub-regulation (7) of Regulation 46, Stakeholders are allowed to make a request for a withdrawal of these amounts prior to the dissolution of the corporate debtor. Under this regulation, it is mandatory for the liquidators to verify such claims and apply to the IBBI board through a specified annexure form for the release of funds to the concerned stakeholders.

Legal Authority

The circular issued by IBBI is in accordance with the authority vested under Section 196 of the IBC code, 2016, which empowers the IBBI board to regulate and oversee the entire insolvency and bankruptcy process within India. In its circular, IBBI intends to streamline the procedures associated with unclaimed dividends and undistributed proceeds to ensure a fair and efficient distribution of assets during the liquidation process. 

Aspect	Description
Regulation Compliance	Aligns with Regulation 46 of IBC 2016.
Obligations of Liquidators	– Mandates depositing unclaimed amounts. – Ensures transparency and accountability.
Stakeholder Procedure	– Outlines claim process before debtor dissolution. – Requires verification and application through forms.
Legal Authority	– Circular issued under Section 196 of IBC 2016.  – Empowers IBBI to regulate insolvency processes. – Aims for fair asset distribution in liquidation.

Conclusion-

In essence, the IBBI circular outlines detailed guidelines for the liquidators related to the deposits and withdrawal process for unclaimed dividends and undistributed proceeds during the liquidation process of a corporate debtor and ensures the proper compliance of regulatory norms duly specified under the IBC code, 2016.

IBBI-2024-Circular-1

1. https://www.ibbi.gov.in/