The Insolvency and Bankruptcy Board of India (IBBI) has
issued regulations pertaining to the voluntary liquidation process for
corporate persons.
The regulation, which will come
into force on April 1, 2017, lays down the process from initiation of
voluntary liquidation of a corporate person till its dissolution.
The
corporate person, for the purpose of this regulation, would include
companies, limited liability partnerships and any other person
incorporated with limited liability.
A
corporate person may initiate a voluntary liquidation proceeding if
majority of the directors or designated partners of the corporate person
make a declaration to the effect that: the corporate person has no debt
or it will be able to pay its debts in full from the proceeds of the
assets to be sold under the proposed liquidation; and the corporate
person is not being liquidated to defraud any person.
If
the liquidator is of the opinion that the liquidation is being done to
defraud a person or the corporate person will not be able to pay its
debts in full from the proceeds of assets to be sold in the liquidation,
he shall make an application to the Adjudicating Authority to suspend
the process of liquidation and pass any such orders as it deems fit, an
official release said.
The
regulations prohibit an insolvency professional from acting as a
liquidator for a corporate person if he is not independent of the
corporate person.
It prohibits partners or directors
of an insolvency professional entity of which the insolvency
professional is a partner or director from representing other
stakeholders in the same liquidation process.
The
regulations oblige the liquidator, and professional(s) assisting him in
liquidation to make disclosures — initial and continuing — about
pecuniary or personal relationship with any of the stakeholders or the
corporate person.
The norms specify the manner and
content of public announcement, receipt and verification of claims of
stakeholders, reports and registers to be maintained, preserved and
submitted by the liquidator, realisation of assets and distribution of
proceeds to stakeholders, distribution of residual assets, and finally
dissolution of corporate person.
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