IBBI Circular Enhancing Transparency and Stakeholder Engagement in Liquidation Process

Vaibhav Rathi

30 Mar, 2024

The Insolvency and Bankruptcy Board of India (IBBI) issued circular No. IBBI/LIQ/70/2024, dated 22^nd Feb. 2024, with an intent to enhance transparency and stakeholder engagements within the liquidation process. IBBI circular mandates several important aspects to ensure and improve effective communication and involvement of stakeholders along with creditors in the entire liquidation process. IBBI’s important aspects include the circulation of progress reports among stakeholders, consultation with the SCC committee in the preparation of preliminary reports, and sharing of Final reports, Form H, and process closure/dissolution orders with the IBBI.

Key highlights

Circulation of Progress Reports:

This IBBI circular rectifies a gap in regulation 15 of the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016, which ensures the liquidators submit the progress reports to the Adjudicating Authority (AA) and the IBBI does not mandate the sharing with the potential stakeholders including creditors. To rectify this, it is now mandatory for liquidators to share the progress reports with the concerned members of the stakeholders’ consultation committee (SCC) after receiving a confidential undertaking. These measures of IBBI intend to reduce the information asymmetry and keep the stakeholders informed about the progress of the entire liquidation process.

Preparation of Preliminary Report:

Under Regulation 13, of the Liquidation process, the liquidators to prepare and submit a preliminary report to the AA outlining the different aspects of the corporate debtors and mention the intended plan of action for the entire liquidation process. Moreover, the absence of SCC consultation while preparing the report may result in oversight of important stakeholder insights. This IBBI circular requires the liquidators to seek proper suggestions and observations from the SCC members at the time of preparing the preliminary report and finalising it while considering the diverse inputs prior to submitting such report to the AA, IBBI and SCC members. 

Sharing of Final Report and Closure Orders with IBBI:

Liquidators under this IBBI circular¹ is supposed to submit a copy of Form H, along with the final report filed before the AA, and order for process closure/dissolution to the IBBI board on email ID: liq.cirp@ibbi.gov.in. Such steps will make sure that the IBBI is kept informed of the completion of liquidation processes and facilitates its regulatory oversight accordingly.

Conclusion

IBBI circular intends to enhance transparency, stakeholder engagement, and regulatory oversight on the entire liquidation process, which will definitely enhance confidence in the insolvency and bankruptcy framework in India.

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