Highlights
- The Insolvency and Bankruptcy Board of India has implemented amendments to enhance the efficiency, transparency, and integrity of the Liquidation and Voluntary Liquidation processes, which include changes to auction timelines and stricter eligibility verification for bidders.
- Mandatory filing of a final report by liquidators when a scheme of compromise or arrangement is approved has been introduced, aimed at strengthening regulatory oversight and improving accountability in the liquidation process.
- The amendments require detailed disclosure of tax deductions by liquidators prior to depositing unclaimed dividends and undistributed proceeds into the Corporate Liquidation Account or Corporate Voluntary Liquidation Account, enhancing transparency in fund management.
The Insolvency and Bankruptcy Board of India has notified the Insolvency and Bankruptcy Board of India (Liquidation Process) (Amendment) Regulations, 2025 and Insolvency and Bankruptcy Board of India (Voluntary Liquidation Process) (Second Amendment) Regulations, 2025 to enhance the efficiency, transparency, and integrity of the Liquidation and Voluntary Liquidation process while addressing emerging challenges.
“The key amendments include changes to the timelines of the auction process, mandatory filing of the final report when a scheme of compromise/ arrangement is approved, completion of voluntary liquidation process even if there is uncalled capital, mandating insolvency professionals to submit details at various stages of liquation/ voluntary liquidation, failing which there are penalties prescribed,” said Saloni Kapadia, Partner, Cyril Amarchand Magaldas.
The amendments, which came into effect with immediate effect, are aimed at improving the accountability, efficiency, transparency, timelines, and integrity of the liquidation process.Saloni Kapadia, Partner, Cyril Amarchand Magaldas.
Auction Process
The board strengthens the action process by giving more time to the prospective bidders to participate in the auction process (from 14 days to about 30 days) by streamlining the verification process thereby facilitating wider participation.”This measure ensures greater participation from potential bidders and allows for improved price discovery, fostering a more competitive and transparent liquidation process,” said Siddharth Nigotia, Senior Associate, SKV Law Offices.The guidelines require the liquidator to verify the eligibility of the highest bidder (H1) within three days of the auction and consult the Stakeholder Consultation Committee (SCC) on the auction results.”This expedited verification process ensures that only qualified bidders are considered, reducing delays and preserving the integrity of the auction,” he added.
However, If the highest bidder (H1) is found ineligible, the next highest eligible bidder (H2) may be considered, subject to consultation with the Stakeholder Consultation Committee.”The amendments also reinforce the commitment to a time-bound resolution by mandating that the Stakeholders’ Consultation Committee verify the highest bidder within three days,” said Soayib Qureshi, Partner, SKV Law Offices.
The strengthening of the Auction Process is done through streamlining the verification process, enhanced reporting of necessary documents, and verification of the disclosure.” By mandating stricter eligibility verification, enhanced reporting, and clearer financial disclosures, these changes mitigate risks of disputes and ineligible participation,” said Rahul Hingmire, Managing Partner, Vis Legis Law Practice.
This also paves the way for curtailing the process of multiple auctions, one after another, as the second-best bidder may very well be considered by the stakeholders committee if at all the highest bidder is either found ineligible or fails to honor the auction commitments.Adv. Amir Bavani, Founder, AB Legal, Hyderabad
Realisation of uncalled or unpaid capital
The notification recommends the Voluntary Liquidation process to be completed even if there is uncalled capital as there are adequate safeguards already in the regulations to protect the creditors and the provisions for realization of uncalled capital or unpaid capital contribution may only result in avoidable delays.”While this move aims to streamline the process, its implications on shareholder financial interests remain a critical area for scrutiny,” said Soayib Qureshi, Partner, SKV Law Offices.
Corporate Liquidation Account and Corporate Voluntary Liquidation Account
The IBBI will continue to manage the Corporate Liquidation Account and Corporate Voluntary Liquidation Account in a separate bank account with a scheduled bank as it has proven to be efficient in expeditious claim processing and overall fund management. “Allowing the IBBI to manage the Corporate Liquidation and Voluntary Liquidation Accounts directly is expected to expedite claim processing and improve overall fund management,” said Palash Taing, Manager, Tatva Legal Hyderabad.
Declaration of Eligibility under Section 29A
IBBI suggests all prospective bidders submit necessary documents, including a declaration of eligibility under Section 29A, as specified in the auction notice on the electronic auction platform or as mentioned in the auction notice. “The legal issue for the bidder would be forfeiture of earnest money deposit if the bidder is found to be ineligible under section 29A of the IBC,” said Alay Razvi, Managing Partner, Accord Juris.
Another Round of Litigation
The IBBI amendment in the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016, and Insolvency and Bankruptcy Board of India (Voluntary Liquidation Process) Regulations, 2017 provide clarity to the existing regulation. However, the regulation might end up inviting more litigation considering the complexities and possibilities of the case.
“The three-day timeline for the RP or Liquidator to verify the eligibility may not be sufficient as the RP may face a challenge in complex matters,” he added.
“In the event of the bidder is wrongfully disqualified, it opens another round of litigation,” he highlights. “If the bid goes to the second highest bidder, the original bidder will still initiate litigation,” he said.
So it will be a backfire and further delay the process. There are more finer concerns, which will have to be looked into for making IBC watertight.Alay Razvi, Managing Partner, Accord Juris.
Keyur Gandhi, Managing Partner, Gandhi Law Associates highlights that extending auction timelines and stricter compliance measures may improve accountability, but they risk delaying asset realization and increasing administrative burdens on liquidators.
He adds, “Centralizing liquidation funds through scheduled banks could streamline financial management but may also raise accessibility concerns.”
IBBI suggests that Insolvency Professionals are now required to submit the details related to liquidation and voluntary liquidation processes in the electronic forms available on IBBI’s portal.
To further ensure timely submission it has been notified that filing delays will attract a late fee of ₹500 per form per calendar month from a date to be notified later. “The mandatory electronic submission of forms modernizes the process, yet late fees for delays could disproportionately affect smaller practitioners. Similarly, new financial disclosure requirements improve transparency but may complicate execution in minor cases,” said Keyur Gandhi, Managing Partner, Gandhi Law Associates
Overall, while these reforms strengthen governance, they must be carefully implemented to avoid unintended delays and excessive procedural complexity.Keyur Gandhi, Managing Partner, Gandhi Law Associates
Tushar Agarwal, Founder & Managing Partner, C.L.A.P. Juris – Advocates & Solicitors finds the amendments to be a “win-win situation for both the liquidator and the claimants,” as the rules will make the entire liquidation process a transparent exercise which is necessary as during liquidation, it is very important that all assets are dissolved legally without any undue favour and the entire fund is being managed with proper records without any manipulation.
Forfeiture of Earnest Money Deposit (EMD)
IBBI recommends that the liquidator must mention in the auction notice that the Earnest Money Deposit (EMD) of the successful bidder shall be forfeited if found ineligible during the auction process. “The introduction of systematic eligibility verification processes, combined with clear EMD forfeiture provisions, creates a robust framework that instills confidence in the liquidation process,” said Amit Tungare, Managing Partner, Asahi Legal.
Submission of Final Report
There is an amendment brought in which directs the liquidators to file the final report, including Form H, with the Adjudicating Authority when a scheme of compromise or arrangement under Section 230 of the Companies Act, 2013, is approved. “Mandating Liquidators to file the final report along with Form H, when a scheme of compromise or arrangement is approved under the Companies Act, 2013, with the Adjudicating Authority i.e., NCLT will strengthen regulatory oversight and improve accountability,” said Pratyush Miglani, Managing Partner, MVAC Advocates & Consultants.
Disclosure of tax deductions:
The regulations now require detailed disclosure of tax deductions by the liquidator before depositing unclaimed dividends and undistributed proceeds into the Corporate Liquidation Account or Corporate Voluntary Liquidation Account. “Furthermore, liquidators must provide detailed disclosures of tax deductions before depositing unclaimed dividends and undistributed proceeds into the respective liquidation accounts,” explains Ankit Rajgarhia, Principal Associate, Karanjawala & Co.
