Tuesday, December 5, 2017

IBC code Liquidation process regulation 2016

There are  46  Regulations

Important definitions

Contributory  -   A  member of the company ,  a Partner of the limited liability  and
Any other  person liable  to contribute towards   the assets of the  corporate debtor in the event of liquidation

Identification number -    Limited Liability  Partnership identificatio number  or the Corporate identity  Number

Preliminary Report  -   the report  prepared  in accordance with regulation 13

Regulation 13  -   The liquidator   shall submit a  Preliminary report  to the Adjudicating Authority  within 75  days  from the  liquidation commencement  date
The preliminary report includes

a)  The  capital structure of the corporate debtor
b)  The estimates of its assets and liabilities  as on the liquidation   commencement date  based on the books of the corporate debtor

In case  of books   of the corporate debtor not reliable, liquidator shall also provide  such estimates  based on   reliable  recores and date otherwise  available to him
c)   Whether he intends to make any  further inquiry  into any matter relating to the promotion, formation or failure of the corporate debtor  of the conduct of the business   thereof and
d)  The proposed  plan of action  for carrying out liquidator  including the  timeline within  which he proposes   to carry out  and the estimated liquidation costs.

Progress Report     Quarterly report   prepared  in accordance with Regulation 15

The liquidator    shall submit  progress  reports to the Adjudicating authority   as under

a)  First  progress  report   within fifteen days after the end of the quarter in which he is appointed

b)  Subsequent  progress reports  within fifteen days  after the end of the every quarter  during which  he acts as  liquidator

Provided   that if an insolvency  professional  ceases  to act as   a liquidator during the liquidation process , he shall   file a progress report  for the quarter  upto the date  of his ceasing  to act, within 15 days  of such cessation

Progress report provide the following information

a)  Appointment, tenure of appointment  and cessation of appointment of professionals
b)  A  statement  indicating  progress in liquidation
i)  settlement  of list of stakeholders
ii)  details of any property  that remain to be sold  and realized
iii)  distribution made to the stakeholders  and
iv)  distribution of unsold property made to the stakeholders

c)  Details fee or remuneration

i)  Fee  due to and  received  by the liquidator  together with a  description  of the activities carried out by him
ii) The remuneration  or fee  paid to professionals  appointed by the liquidator  together with a   description  of activities carried out by them
iii)  other  expenses incurred by the liquidator  whether paid or not

d)  Development in any  material litigation, by or against  the corporate debtor
e) filing or  and  developments in application for avoidance  of transactions  in accordance with   chapter III  pf Part II  of the code
f) changes if any in estimated liquidation costs

3)  Progress Report  shall enclose   an account maintained  by the liquidator
a)  his receipts and payments  during the quarter and
b)  the cumulative  amount of his receipts and payments  since the  liquidation commencement date

4) The Progress Report  shall enclose a  statement indicating any material change  in the expected realization  of any property proposed to be sold  along with  the basis  for such change

Provided that the above statement  shall not be accessible to any person  during the course of liquidation , unless permitted by the  Adjudicating authority

5) Fourth  quarter progress report  shall enclose audited   accounts of the liquidator's receipts  and payments   for the financial year

In case  Insolvency professional  ceases to act as  liquidator , the audited accounts  which he  has acted as  liquidator, shall be  enclosed   with the progress report  to be filed  after cessation of his appointment

Appointment of liquidator  13th February 2017  and ceases  to act as liquidator  on 12th February 2019


Report No
Period covered  in the quarter
Last date of submission  of Report
1
13th Feb  to 31st March 2017
15th April 2017  ( Also submit audited accounts since it is fourth quarter )
2
April 2017  to  June 2017
15th July  2017
3
July  2017 to  September 2017
15th  October 2017
4
October 2017 to  December 2017
15th January  2017
5
January 2018  to  March 2018
15th April  2018  ( Also submit  audited accounts since it is  fourth quarter)
6
April 2018  to  June 2018
15th July  2018
7
July  2018 to  September 2018
15th  October 2018
8
October 2018 to  December 2018
15th January  2017
9
January 2019  to   12th February 2019
27th February 2019  ( Also  submit  audited accounts since he ceases to act as liquidator)




Registered Valuer    A  person  registered  in accordance  with the Companies Act, 2013

Stakeholder  means  the  stakeholders   entitled  to  distribution of proceeds under Section 53


Chapter  II
Regulation 3

Eligibility   for appointment as liquidator


 Liquidator and every partner or director  of the insolvency  professional entity  of which he is a  partner  or  director  is independent   of the corporate debtor

Who is Independent

a)  is eligible  to be appointed  as an independent  director on the board of the corporate debtor  under Section 149 of the Companies Act, 2013   where the corporate debtor is  a company

b)  is not  a related party  of the corporate debtor or
c)  has  not been an employee or proprietor or a partner

i)  of  a firm  of auditors  or company secretaries or cost auditors  of the corporate debtor or
ii)  of a legal or a consulting  firm,  that has or had any transaction  with the  corporate debtor  contributing    ten percent or more of the gross turnover  of such firm, in the last three financial years

2)  shall disclose  the  existence of any pecuniary  or personal relationship with the concerned  corporate debtor  or any or any of its  stakeholders  as soon  as he becomes aware of it,  to the Board  and the Adjudicating authority


3) An  insolvency  professional  shall not continue  as a liquidator  if the insolvency professional entity  of which he is a  director or partner or any other partner  or director  of such insolvency professional entity   represents  any other stakeholders  in the same liquidation process

Regulation No.4   Liquidator's fees 


Liquidator fee is  form part of liquidation costs


The  liquidator  shall  be entitled  to such fee  and in such manner  as has been  decided by  the committee of creditor   before  a liquidation  order is passed  under Sections  33 (1) (a) and 32 92)


Liquidator shall be entitled   to a fee as  a percentage  of the amount   realized   net of  other l;liquidation costs


Percentage of fee on the amount realized/ distributed
Amount of realization/ Distribution  ( In Rupees)
In the first six months
In the next six months
In the next one year
Thereafter
                       Amount of Realization  ( exclusive  of liquidation costs)
On the first one crore
5.00
3.75
2.55
1.88
On the next  9 crore
3.75
2.80
1.88
1.41
On the next 40 crore
2.50
1.88
1.25
0.94
On the next 50 crore
1.25
0.94
0.68
0.51
On further sum realized 
0.25
0.19
0.13
0.10


                       Amount  Distributed  to Stakeholders)
On the first one crore
2.50
1.88
1.25
0.94
On the next  9 crore
1.88
1.40
0.94
0.71
On the next 40 crore
1.25
0.94
0.63
0.47
On the next 50 crore
0.63
0.48
0.34
0.25
On further sum realized 
0.13
0.10
0.06
0.05


4)  The liquidator  shall be entitled  to receive half of the fee payable  on realization under sub regulation  (3) only after such  realized  amount is distributed


CHAPTER III

POWERS AND FUNCTIONS OF LIQUIDATOR

REGULATIONS  5   REPORTING

1) The liquidator  shall prepare   and submit  the following reports

a)  Preliminary Report
b) an asset memorandum
c)  Progress  report
d)  sale report (s)
e)  minutes of consultation  with stakeholders and
f)  the final report  prior to distribution

Whom report to be submitted  -    Adjudicating Authority  in the manner specified under these regulations

2)    The liquidator shall preserve  a physical  as well as   electronic copy  of the reports  and minutes   for eight years  after the dissolution of the corporate debtor   ( Minutes and reports mentioned in sub regulation  (1)  )


3)  Available to all  stakeholders  in either electronic or physical form , on receipt of

a)  an application in writing
b) cost of making  such reports and minutes  available to  it and 

c) an Undertaking   from the stakeholder   that it shall maintain confidentiality of such reports  and minutes  
shall not  use these  to cause an undue gain or undue loss  to itself  or any other person

Regulations  6   Registers and books of account

1)  Where  the books of accounts of the corporate debtor is incomplete  on the commencement date, the liquidator  shall have them completed  and brought up to date  with all  convenient  speed  as soon as the order for liquidation order is passed

2)  The liquidator shall maintain  the following  registers and books  as may be applicable, in relation to liquidation  of the corporate debtor and shall preserve  them for a period of eight years  after the dissolution  of the corporate debtor 

a)  Cash book
b) Ledger
c)   Bank Ledger
d)   Register of Fixed Assets  and inventories
e)  Securities and investment register
f)  Register of Book debts and  outstanding debts
g)  Tenants Ledger
h) Suits Register
i)  Decree Register
j)  Register of claims and Dividends
k)  Contribution Ledger
l)  Distribution Register
m )  Fee Register
n )  Suspense Register
o)  Documents Register
p)  Books Register
q)   Register of unclaimed  dividends  and undistributed  properties  deposited  in accordance with Regulation 45  and 
r)  Such other books or registers  as may be  necessary to account for  transactions  entered into by him  in relation  to the corporate debtor

3)  The registers  and books  under sub regualtion 2   may be maintained  in the  forms  indicated  in Schedule III  with such modifications  as the liquidator  may deem fit  in the facts  and circumstances  of the liquidation process

4)   The liquidator  shall keep  receipts for all payments  made or  expenses  incurred by him


Regulations 7  Appointment of Professionals

1)  A  liquidator   may appoint  professionals  to assist him  in the discharge  of the duties, obligations   and  functions  for  a  reasonable  remuneration.
The remuneration payable to such professionals   shall form part of the liquidation cost.

2)  The  following professionals are not eligible to be appointed by liquidator
     who is his relative , is  a related party of the corporate debtor or has served   as an auditor  to the  corporate debtor  in the five years preceding the liquidation   commencement date.

3)   Disclosure of  pecuniary or personal  relationship by Professional appointed or proposed to be appointed , with  any of the stakeholders  or the concerned  corporate debtor  as soon as  he becomes  aware of it to the liquidator 


 Regulation  8  Consultation with stakeholders

1)  The stakeholders  consulted  under Section  35 (2)  shall extend  all assistance  and cooperation  to the liquidator  to complete  the liquidation   of the corporate debtor

2)  The liquidator shall maintain  the particulars  of any consultation with the stakeholders  made  under this  Regulation, as specified  in Form A of  Schedule II


 Regulation No 9  Personnel  to extend  cooperation to liquidator

1)  The liquidator may make an application to the  Adjudicating Authority  for  a direction that   a  person who

a)  is or has been  an officer,  auditor, employee, promoter or partner of the  corporate debtor
b)   was the interim  resolution professional,  resolution professional,  or the previous  liquidator of the corporate debtor or
c)   has possession of any of the properties  of the corporate debtor

2)  An application  may be made  under this Regulation  only after  the liquidator  has made  reasonable  efforts to obtain  the information  from such persons  and failed to obtain it.

Regulation  No. 10  Disclaimer of onerous property

1)    Where any part of the property  of a corporate debtor  consists of

a)  land of any tenure , burdened with  onerous convenants
b)   shares or stocks in companies
c)  any other property  which is not saleable or is not  readily  saleable by reason of the possession  thereof being bound either  to the performance  of any onerous  act or to the payment of any sum money or
d)  unprofitable  contracts

the liquidator  may, notwithstanding that 
he has endeavored  to sell  or 
has taken  possession  of the property or
exercised  any act of ownership  in relation thereto  or 
done  anything  in pursuance of the contract  f,

make an application to  Adjudicating authority  within 6 months  from the liquidation commencement   date,  or such extended  period  as may be allowed by the Adjudicating authority to disclaim  the property or contract

2)   The liquidator shall not make an application under sub regulation  (1)
if  a person interested in the property  or contract inquired  in writing  whether he will  make an application  to have such property  disclaimed,  and he did not communicate  his intention   within one month   from receipt of such inquiry

3)  The liquidator  shall serve a notice  to persons  interested in the onerous property  or contract   at least seven days  before making  an application for disclaimer  to the Adjudicating authority

Who is interested  person 

a)   is  entitled    to the benefit   or subject   to the burden  of the contract or
b)  claims  an interest  in a disclaimed  property  or is under  a liability  not discharged  in respect of  a disclaimed property


4)  Subject to  the order of  the Adjudicating  Authority approving  such disclaimer, 

the disclaimer  shall operate  to determine,  from the date of disclaier, the  rights, interest and liabilities  of the corporate debtor in or in respect of the property  or  contract disclaimed , but shall not,  except   so far as  is necessary  for the purpose of releasing  the  corporate debtor   and the property  of the corporate   from liability, affect the rights, interest   or liabilities of any other person.

5)   A  person  affected by the disclaimer under this Regulation shall be deemed  to be a creditor  of the corporate debtor  for the amount of the compensation or damages  payable in respect  of such effect,  and may accordingly  be payable  as a debt  in liquidator  under section 53 (1) (f)


Regulations No 11  Extortionate credit transactions

A  transaction  shall  be  considered  an extortionate  credit  transaction under  section 50 (2)   where the terms

1)  require  the corporate debtor  to make exorbitant  payments  in respect of the credit provided or
2)   are unconscionable  under the principles of law relating to contracts


Chapter  IV

General

Regulation No 12  Public announcement by liquidator

1)    The liquidator  shall make an  public announcement  in Form B  of Schedule II  within  five days  from his appointment

2)  The public announcement shall

a)  call  upon stakeholders  to submit  their claims  as on the liquidation commencement date  and
b)  provide the last date for submission of claim,  which shall be  thrity days  from the  liquidation commencement date


3)  The announcement   shall be published
a)  in one English  and one Regional language  newspaper  with wide circulation  as the location of the registered office   and principal office, if any of the corporate debtor  and any other location  where in the opinion  of the liquidator, the corporate debtor  conducts material  business  operations.

b)  on the website if any of the corporate debtor  and 
c)  on the website, if any,  designated by the Board  for this purpose


Regulation 13  Preliminary report

 Regulation 13  -   The liquidator   shall submit a  Preliminary report  to the Adjudicating Authority  within 75  days  from the  liquidation commencement  date   
The preliminary report includes

a)  The  capital structure of the corporate debtor
b)  The estimates of its assets and liabilities  as on the liquidation   commencement date  based on the books of the corporate debtor

In case  of books   of the corporate debtor not reliable, liquidator shall also provide  such estimates  based on   reliable  recores and date otherwise  available to him
c)   Whether he intends to make any  further inquiry  into any matter relating to the promotion, formation or failure of the corporate debtor  of the conduct of the business   thereof and
d)  The proposed  plan of action  for carrying out liquidator  including the  timeline within  which he proposes   to carry out  and the estimated liquidation costs.


Regulation No 14  Early dissolution

Any  time after  the preparation of the preliminary report, if it appears  to the liquidator  that

a)  the realization  properties  of the corporate debtor  are insufficient   to  cover  the cost of the liquidation  process and
b)   the affairs  of the corporate debtor  do no require  any further investigation

The liquidator  may apply  to the Adjudicating  Authority  for early dissolution  of the corporate debtor  and for necessary   directions  in respect of  such dissolution

Regulations No. 15  Progress Report


Progress Report     Quarterly report   prepared  in accordance with Regulation 15

The liquidator    shall submit  progress  reports to the Adjudicating authority   as under

a)  First  progress  report   within fifteen days after the end of the quarter in which he is appointed

b)  Subsequent  progress reports  within fifteen days  after the end of the every quarter  during which  he acts as  liquidator

Provided   that if an insolvency  professional  ceases  to act as   a liquidator during the liquidation process , he shall   file a progress report  for the quarter  upto the date  of his ceasing  to act, within 15 days  of such cessation

Progress report provide the following information

a)  Appointment, tenure of appointment  and cessation of appointment of professionals
b)  A  statement  indicating  progress in liquidation
i)  settlement  of list of stakeholders
ii)  details of any property  that remain to be sold  and realized
iii)  distribution made to the stakeholders  and
iv)  distribution of unsold property made to the stakeholders

c)  Details fee or remuneration

i)  Fee  due to and  received  by the liquidator  together with a  description  of the activities carried out by him
ii) The remuneration  or fee  paid to professionals  appointed by the liquidator  together with a   description  of activities carried out by them
iii)  other  expenses incurred by the liquidator  whether paid or not

d)  Development in any  material litigation, by or against  the corporate debtor
e) filing or  and  developments in application for avoidance  of transactions  in accordance with   chapter III  pf Part II  of the code
f) changes if any in estimated liquidation costs

3)  Progress Report  shall enclose   an account maintained  by the liquidator
a)  his receipts and payments  during the quarter and
b)  the cumulative  amount of his receipts and payments  since the  liquidation commencement date

4) The Progress Report  shall enclose a  statement indicating any material change  in the expected realization  of any property proposed to be sold  along with  the basis  for such change

Provided that the above statement  shall not be accessible to any person  during the course of liquidation , unless permitted by the  Adjudicating authority

5) Fourth  quarter progress report  shall enclose audited   accounts of the liquidator's receipts  and payments   for the financial year

In case  Insolvency professional  ceases to act as  liquidator , the audited accounts  which he  has acted as  liquidator, shall be  enclosed   with the progress report  to be filed  after cessation of his appointment

Appointment of liquidator  13th February 2017  and ceases  to act as liquidator  on 12th February 2019


Report No
Period covered  in the quarter
Last date of submission  of Report
1
13th Feb  to 31st March 2017
15th April 2017  ( Also submit audited accounts since it is fourth quarter )
2
April 2017  to  June 2017
15th July  2017
3
July  2017 to  September 2017
15th  October 2017
4
October 2017 to  December 2017
15th January  2017
5
January 2018  to  March 2018
15th April  2018  ( Also submit  audited accounts since it is  fourth quarter)
6
April 2018  to  June 2018
15th July  2018
7
July  2018 to  September 2018
15th  October 2018
8
October 2018 to  December 2018
15th January  2017
9
January 2019  to   12th February 2019
27th February 2019  ( Also  submit  audited accounts since he ceases to act as liquidator)



 CHAPTER V 

CLAIMS

 Regulation No. 16   Proof of claim

Progress Report     Quarterly report   prepared  in accordance with Regulation 15

The liquidator    shall submit  progress  reports to the Adjudicating authority   as under

a)  First  progress  report   within fifteen days after the end of the quarter in which he is appointed

b)  Subsequent  progress reports  within fifteen days  after the end of the every quarter  during which  he acts as  liquidator

Provided   that if an insolvency  professional  ceases  to act as   a liquidator during the liquidation process , he shall   file a progress report  for the quarter  upto the date  of his ceasing  to act, within 15 days  of such cessation

Progress report provide the following information

a)  Appointment, tenure of appointment  and cessation of appointment of professionals
b)  A  statement  indicating  progress in liquidation
i)  settlement  of list of stakeholders
ii)  details of any property  that remain to be sold  and realized
iii)  distribution made to the stakeholders  and
iv)  distribution of unsold property made to the stakeholders

c)  Details fee or remuneration

i)  Fee  due to and  received  by the liquidator  together with a  description  of the activities carried out by him
ii) The remuneration  or fee  paid to professionals  appointed by the liquidator  together with a   description  of activities carried out by them
iii)  other  expenses incurred by the liquidator  whether paid or not

d)  Development in any  material litigation, by or against  the corporate debtor
e) filing or  and  developments in application for avoidance  of transactions  in accordance with   chapter III  pf Part II  of the code
f) changes if any in estimated liquidation costs

3)  Progress Report  shall enclose   an account maintained  by the liquidator
a)  his receipts and payments  during the quarter and
b)  the cumulative  amount of his receipts and payments  since the  liquidation commencement date

4) The Progress Report  shall enclose a  statement indicating any material change  in the expected realization  of any property proposed to be sold  along with  the basis  for such change

Provided that the above statement  shall not be accessible to any person  during the course of liquidation , unless permitted by the  Adjudicating authority

5) Fourth  quarter progress report  shall enclose audited   accounts of the liquidator's receipts  and payments   for the financial year

In case  Insolvency professional  ceases to act as  liquidator , the audited accounts  which he  has acted as  liquidator, shall be  enclosed   with the progress report  to be filed  after cessation of his appointment

Appointment of liquidator  13th February 2017  and ceases  to act as liquidator  on 12th February 2019


Report No
Period covered  in the quarter
Last date of submission  of Report
1
13th Feb  to 31st March 2017
15th April 2017  ( Also submit audited accounts since it is fourth quarter )
2
April 2017  to  June 2017
15th July  2017
3
July  2017 to  September 2017
15th  October 2017
4
October 2017 to  December 2017
15th January  2017
5
January 2018  to  March 2018
15th April  2018  ( Also submit  audited accounts since it is  fourth quarter)
6
April 2018  to  June 2018
15th July  2018
7
July  2018 to  September 2018
15th  October 2018
8
October 2018 to  December 2018
15th January  2017
9
January 2019  to   12th February 2019
27th February 2019  ( Also  submit  audited accounts since he ceases to act as liquidator)

  CHAPTER  V

CLAIMS

 Regulation No. 16   Proof of claim

 A person,  who claims  to be a stakeholder, shall  prove his claim for debt or dues  to his,  including  interest if any,  as on the liquidation  commencement date

 Regulation No. 17    Claims by  Operational creditor


1)   A  person  claiming  to be an operational creditor  of the corporate debtor, other than a  workman  or employee , shall submit  proof  of claim  to the liquidator in person, by post or by electronic  means in Form C of Schedule II

2)  The existence  of  debt  to an operational  creditor  under this  Regulation may be proved on the basis of

a)   the records  available  with an information utility if any or
b)   other relevant  documents  which adequately  establish  the debt,  including any or all of the following

i)   a contract  for the supply of goods  and services  with corporate debtor
ii)  an invoice  demanding  payment for the goods and services  supplied to the corporate debtor
iii)   an order of a court  or tribunal  that has  adjudicated  upon the non payment of  debt,  if any and
v)   Financial accounts

 Regulation no 18  Claims  by financial creditors

1)  A person  claiming  to be  a financial  creditor  of the corporate debtor  shall submit   proof of claim  to the liquidator   -  Electronic  means  in Form D of Schedule II

2)  The existence of debt due to  the financial creditor  may be proved  on the basis


a)   the records available   in an information utility if any or

b)    other relevant documents  which adequately  establish   the debt, including any or all of the following

i)  a  financial contract   supported by financial statements  as evidence of the debt

ii)    a  record   evidencing  that the amounts committed  by the financial  creditor  to the corporate debtor  under a facility has been drawn by the corporate debtor

iii)  financial statements  showing that  the debt  has not been repaid and
iv)  an order of a court  or tribuanl  that  has adjudicated   upon the non payment of a  debt  if any

  











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