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Enhancing Transparency and Efficiency: Key Amendments to Liquidation Process Regulations


The Insolvency and Bankruptcy Board of India (‘IBBI’) has recently introduced significant amendments through the IBBI (Liquidation Process) (Amendment) Regulations, 2024[i] (‘2024 Regulations’) to the existing IBBI (Liquidation Process) Regulations, 2016 (‘2016 Regulations’) aimed at refining the existing regulatory framework governing the liquidation process. Effective from 12.02.2024, these amendments mark a substantial evolution in the regulatory landscape, emphasizing transparency, accountability, and efficiency in the liquidation process.

Key Amendments and Implications for the Liquidation Process

Filing of Proposal for Compromise or Arrangement

The 2024 Regulations have amended reg. 2B(1) of the 2016 Regulations, imposing stricter criteria for the filing of compromise or arrangement proposals. Under the revised regulations, the liquidator can only file such proposals if recommended by the committee under reg. 39BA of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016. The erstwhile provision in this regard allowed the liquidator to file a proposal of compromise or arrangement without any committee recommendation. Furthermore, the proposal must be filed within 30 days from the liquidation commencement date, ensuring a timely and efficient process.

Mandatory Stakeholders’ Consultation Committee’s Advice for Early Dissolution

Amendments to reg. 14 of the 2016 Regulations mandate consultation by the liquidator with the stakeholders’ consultation committee (‘SCC’) before applying for early dissolution. The 2024 Regulations also stipulate the liquidator to provide a detailed report in the application to the Adjudicating Authority (‘AA’). This requirement enhances decision-making by incorporating the views and recommendations of key stakeholders, thereby promoting a more collaborative and informed approach to the liquidation process.

Enhanced Role of the SCC in Advising the Liquidator

Reg. 31A of the 2016 Regulations has been amended to include three additional clauses aimed at expanding the role of the SCC in the liquidation process. Now, the liquidator is required to consult the SCC before initiating or continuing any legal proceedings, extending the payment period of balance sale consideration beyond ninety days, or in case of a failed auction. These amendments underscore the importance of stakeholder involvement and ensure that key decisions are made with broader input and scrutiny.

Quarterly Meetings and Reporting

Under the amended reg. 31A(6), liquidators are now mandated to convene SCC meetings at least once every quarter to enhance oversight and transparency in the liquidation process. While the frequency of these meetings, set at 30-day intervals, may be reduced if deemed necessary by the SCC, at least one meeting must be held per quarter. During these meetings, liquidators must furnish a comprehensive report detailing the progress of the liquidation, ongoing legal proceedings, and the total incurred costs. Additionally, the liquidators must justify any instances of cost overruns. This provision promotes regular communication, and accountability, and ensures that stakeholders are kept informed about the progress of the liquidation process.

Decision Making for Viability of Sale of Corporate Debtor as a Going Concern

The amended reg. 32A mandates the liquidator to consult the SCC before deciding to run the affairs of the Corporate Debtor (‘CD’) as a going concern. Furthermore, the regulation stipulates that the sale of the CD as a going concern cannot be exclusively conducted through auction after the initial auction, thereby ensuring that all available options are carefully considered before reaching a decision. This requirement emphasizes the importance of thorough evaluation and stakeholder consultation in determining the viability of continuing the CD’s operations as a going concern.

Marketing Strategy Review and Legal Proceedings

The introduction of clear provisions for reviewing marketing strategies and guidelines for legal proceedings have been introduced, ensuring that such actions are economically justified. Amendments to reg. 31A, specifically the addition of sr. 6A and 6B now require the liquidator to seek the advice of the SCC before initiating or continuing any legal proceedings. This requirement promotes efficiency and transparency in the liquidation process by integrating stakeholder input and ensuring that decisions regarding legal actions are made with careful consideration.

Restrictions on Private Sale Procedure

The amendment to reg. 33 of the 2016 Regulations now requires the liquidator to consult with the SCC before proceeding with the sale of the CD’s assets through a private sale. The ability for the liquidator to conduct a private sale of an asset, selling it above the reserve price of a failed auction, has been eliminated. This modification ensures that any sales of assets are carried out transparently, with the involvement of essential stakeholders in the decision-making process.

Flexibility in Reserve Price

The amendments provide the liquidator with flexibility in adjusting the reserve price of assets, ensuring maximum value recovery from liquidation. With approval from the SCC, the reserve price may be reduced by up to 25% for assets with existing valuations of the CIRP or by up to 10% for assets with fresh valuations conducted during liquidation.

Valuation and Sale Process Adjustments

Adjustments to the valuation and sale processes provide clear guidelines aimed at maximizing value recovery during liquidation, while also ensuring fairness and accuracy. A new requirement mandates the liquidator to organize meetings where registered valuers elucidate their methodology and rationale for any substantial deviations from the valuations conducted during the CIRP. This initiative promotes transparency and accountability in the valuation process, enhancing stakeholder confidence in the liquidation proceedings.

Exclusion of Certain Assets from Liquidation Estate

The amended reg. 46A provides that assets given to allottees in real estate projects will not form part of the liquidation estate of the CD. This provision addresses sector-specific concerns and promotes fairness and efficiency in liquidation proceedings by delineating certain assets from inclusion in the liquidation estate.

Modification to Forms

Amendments have also been made to Schedule I and II of the 2016 Regulations in the Compliance Certificate under Form H and Form A for reporting consultation with stakeholders. The said forms have been modified to capture additional details such as the amount realized during liquidation, extension period in auction notice for balance sale consideration, etc. to ensure comprehensive reporting, facilitating better compliance and oversight.


The amendments introduced through the 2024 Regulations represent a significant step from IBBI (Liquidation Process) (Second Amendment) Regulations, 2022[ii], towards enhancing the transparency, accountability, and efficiency of the liquidation process. By increasing stakeholder involvement, tightening timelines, and providing clear guidelines, these amendments aim to improve outcomes for all stakeholders involved. By promoting greater transparency and accountability, streamlining processes, and ensuring comprehensive stakeholder engagement, these amendments contribute to a more robust and effective framework for managing corporate insolvency and maximizing value recovery from liquidation. Overall, these regulatory changes signify a positive step toward fostering a fair and efficient liquidation process that benefits all stakeholders.

End Notes:

[i]  Notification no. IBBI/2023-24/GN/REG112, dated 12.02.2024.

[ii] Notification no. IBBI/2022-23/GN/REG094, dated 16.09.2022.

Authored by Aditya Gupta, Advocate at Metalegal Advocates. The views expressed are personal and do not constitute legal opinion.


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