CAIRR Update February 13, 2024

13/02/2024

Summary of the IBBI Notification dated 12/02/2024.

This notification is integrated in our free-to-use website ca2013.com.

The key highlights of the amendments are as follows: 

1. Following powers can be exercised by the liquidator only after advice/recommendation/consultation with the Consultation Committee:
   a. Filing proposal of compromise or arrangement under regulation 39BA of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016. The said proposal shall not be filed after expiry of thirty days from the liquidation commencement date.
   b. Application for early dissolution of the corporate debtor to the Adjudicating Authority with a detailed report incorporating the views of the said committee.
   c. Continuation or initiation of any legal proceeding only after presenting the economic rationale for the proposal to the consultation committee. Further, mandatory information that needs to be presented in every meeting of the consultation committee has been provided for in the said circular.
   d. Obtain fresh valuation of the assets or business intended to be sold only if the Consultation Committee is of the opinion for the same.
   e. Run the affairs of the corporate debtor as a going concern to the extent approved by the Consultation Committee.
   f. Confirm to the buyer about the private sale under Schedule I in para 2 under Clause 3A.
2. The scope of matters on which the consultation committee can advise has been increased to include additional matters such as review of marketing strategy in case of failure of sale of corporate debtor as a going concern; continuation or institution of any suits or legal proceedings by or against the corporate debtor and extension of payment of balance sale consideration as provided in clause(12) of Para 1 of Schedule I, beyond ninety days, to be disclosed in the auction notice.
3. The consultation committee shall hold at least one meeting in each quarter and the gap between 2 meetings should not exceed 30 days from the previous meeting unless extended by the Committee.
4. The definition of the term “voting” has been explained to mean voting cast by the representatives of the consultation committee.
5. Sale of the corporate debtor as a going concern cannot be offered as the only option for bidders after the first auction.
6. The liquidator will now be required to seek prior consultation with the consultation committee to sell the assets of the corporate debtor by means of private sale. Further, the said consultation has been omitted in case the asset is sold at a higher price than the reserve price of a failed auction.
7. Where the liquidator is of the view that a fresh valuation is required, the registered valuer shall explain the methodology for arriving at such valuation in a meeting facilitated by the liquidator before the finalisation of the Report and the confidentiality of the same shall be maintained. In case the deviation is more than twenty-five percent, the difference shall be explained in a meeting by the registered valuers.
8. The Stakeholders who claim to be entitled to any amount deposited into the Corporate Liquidation Account may File Form-I (in replacement to From J) prior to the dissolution of the corporate person.
9. Wherever the corporate debtor has given possession to an allottee in a real estate project, such asset shall not form a part of the liquidation estate of the corporate debtor.
10. The liquidator is now required to mention in the auction notice, the period extended beyond ninety days for payment of balance sale consideration.
11. The Amount prescribed for reduction in reserve price fixed in accordance with Regulation 35 where an auction fails, has been reduced from twenty-five percent to not more than ten percent at a time. Further, if the reserve price of the failed auction of the asset was fixed as per the valuation under sub-regulation (1) of regulation 35, the liquidator may reduce the reserve price up to twenty-five percent, once during the process only after advice of the consultation committee.
12. The timeline for payment of the balance sale consideration has been changed to provide that the said consideration shall be paid within ninety days, or such period as mentioned in the auction notice failing which the sale shall stand cancelled.
13. The Form A provided under principal regulations in Schedule II has been substituted, copy of which has provided in the said circular.

Click here to view the IBBI Notification.