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1 INSOLVENCY AND BANKRUPTCY BOARD OF INDIA (VOLUNTARY LIQUIDATION PROCESS) REGULATIONS, 20171 [AMENDED UPTO 15.01.2020] IBBI/2016-17/GN/REG010. -In exercise of the powers conferred by sections 59, 196 and 208 read with section 240 of the Insolvency and Bankruptcy Code, 2016 (31 of 2016), the Board hereby makes the following Regulations, namely: - CHAPTER I PRELIMINARY 1. Short title and commencement. (1) These Regulations may be called the Insolvency and Bankruptcy Board of India (Voluntary Liquidation Process) Regulations, 2017. (2) These Regulations shall come into force on1st April, 2017. (3) These Regulations shall apply to the voluntary liquidation of corporate persons under Chapter V of Part II of the Insolvency and Bankruptcy Code, 2016. 2. Definitions. (1) In these Regulations, unless the context otherwise requires- (a) “Code” means the Insolvency and Bankruptcy Code, 2016; (b) “contributory” means a member of a company, partner of a limited liability partnership, and any other person liable to contribute towards the assets of the corporate person in the event of its liquidation; 2[(ba) “Corporate Voluntary Liquidation Account” means the Corporate Voluntary Liquidation Account operated and maintained by the Board under regulation 39;] (c) “liquidation commencement date” means the date on which the proceedings for voluntary liquidation commence as per section 59(5) and Regulation 3(4); (d) “Registrar” shall have the same meaning assigned to it under section 2(75) of the Companies Act, 2013 or section 2(1)(s) of the Limited Liability Partnership Act, 2008 or the authority administering the Act under which the corporate person is incorporated, as applicable; (e) “section” means a section of the Code; and 1Vide Notification No. IBBI/2016-17/GN/REG010, dated 31st March, 2017, published in the Gazette of India, Extraordinary, Part III, Sec.4, vide No. 130, dated 31st March, 2017 (w.e.f. 01.04.2017). 2 Ins. by Notification No. IBBI/2019-20/GN/REG054, dated 15th Jan., 2020 (w.e.f. 15.01.2020). 2 (f) “stakeholders” mean the stakeholders entitled to proceeds from the sale of liquidation assets under section 53. (2) The term liquidation in these Regulations refers to voluntary liquidation. (3) Unless the context otherwise requires, words and expressions used and not defined in these Regulations, but defined in the Code, shall have the meanings assigned to them in the Code. CHAPTER II COMMENCEMENT OF LIQUIDATION 3. Initiation of Liquidation (1) Without prejudice to section 59(2), liquidation proceedings of a corporate person shall meet the following conditions, namely: — (a) a declaration from majority of (i) the designated partners, if a corporate person is a limited liability partnership, (ii) individuals constituting the governing body in case of other corporate persons, as the case may be, verified by an affidavit stating that- (i) they have made a full inquiry into the affairs of the corporate person and they have formed an opinion that either the corporate person has no debt or that it will be able to pay its debts in full from the proceeds of assets to be sold in the liquidation; and (ii) the corporate person is not being liquidated to defraud any person; (b) the declaration under sub-clause (a) shall be accompanied with the following documents, namely: — (i) audited financial statements and record of business operations of the corporate person for the previous two years or for the period since its incorporation, whichever is later; (ii) a report of the valuation of the assets of the corporate person, if any prepared by a registered valuer; (c) within four weeks of a declaration under sub-clause (a), there shall be- (i) a resolution passed by a special majority of the partners or contributories, as the case may be, of the corporate person 3 requiring the corporate person to be liquidated and appointing an insolvency professional to act as the liquidator; or (ii) a resolution of the partners or contributories, as the case may be, requiring the corporate person to be liquidated as a result of expiry of the period of its duration, if any, fixed by its constitutional documents or on the occurrence of any event in respect of which the constitutional documents provide that the corporate person shall be dissolved, as the case may be, and appointing an insolvency professional to act as the liquidator: Provided that the corporate person owes any debt to any person, creditors representing two-thirds in value of the debt of the corporate person shall approve the resolution passed under sub-clause (c) within seven days of such resolution. (2) The corporate person shall notify the Registrar and the Board about the resolution under sub-regulation (1) to liquidate the corporate person within seven days of such resolution or the subsequent approval by the creditors, as the case may be. (3) Subject to approval of the creditors under sub-regulation (1), the liquidation proceedings in respect of a corporate person shall be deemed to have commenced from the date of passing of the resolution under sub-clause (c) of sub-regulation (1): Explanation: For the purposes of sub-regulations (1) to (3), corporate person means a corporate person other than a company. (4) The declaration under sub-regulation (1)(a) or under section 59(3)(a) shall list each debt of the corporate person as on that date and state that the corporate person will be able to pay all its debts in full from the proceeds of assets to be sold in the liquidation. 4. Effect of liquidation. (1) The corporate person shall from the liquidation commencement date cease to carry on its business except as far as required for the beneficial winding up of its business. (2) Notwithstanding the provisions of sub-section (1), the corporate person shall continue to exist until it is dissolved under section 59(8). CHAPTER III APPOINTMENT AND REMUNERATION OF LIQUIDATOR 5. Appointment of Liquidator. (1) An insolvency professional shall not be appointed by a corporate person if he is not eligible under Regulation 6. 4 (2) The resolution passed under regulation 3(2)(c) or under section 59(3)(c), as the case may be, shall contain the terms and conditions of the appointment of the liquidator, including the remuneration payable to him. 6. Eligibility for appointment as liquidator. (1) An insolvency professional shall be eligible to be appointed as a liquidator if he, and every partner or director of the insolvency professional entity of which he is a partner or director is independent of the corporate person: Explanation: A person shall be considered independent of the corporate person, if he- (a) is eligible to be appointed as an independent director on the board of the corporate person under section 149 of the Companies Act, 2013 (18 of 2013), where the corporate person is a company; (b) is not a related party of the corporate person; or (c) has not been an employee or proprietor or a partner- (i) of a firm of auditors or 3[secretarial auditors] or cost auditors of the corporate person; or (ii) of a legal or a consulting firm, that has or had any transaction with the corporate person contributing ten per cent or more of the gross turnover of such firm, at any time in the last three years. (2) An insolvency professional shall not be eligible to be appointed as a liquidator if he, or the insolvency professional entity of which he is a partner or director is under a restraint order of the Board.
