Liquidation Process–Regulations

Regulations came into effect 15.12.2016 –Amended upto 22.10.2018

  • Companies —Books of Accounts and the financial statements as defined in Companies Act 2013–Section 2/13 and 2/40—
  • LLP–Books of Account [ only ] mean as mentioned in -Section 34 of LLP Act 2008
  • Contributory means member of the company , a partner of LLP and any other person liable to contribute towards the assets of the corporate debtor in the event of liquidation.
  • Section 5/16–Liquidation Cost —

[a] fee payable to the liquidator under regulation 4
[b] fee payable by the liquidator under regulation 7
[c] cost incurred by the liquidator under regulation 24
[d] interest on interim finance for a period of twelve months or for the period  from the LCD till repayment of interim finance whichever is lower.

[ Self Query-–[d] why there is a cap on interest payment ? — does it mean that there could be a situation where either the interim finance or the interest  is not paid back within 12 months of LCD ? ]

  • Stakeholders means the stakeholders entitled to distribution of proceeds under Section 53

3–Eligibility for appointment as a liquidator —

  • is eligible to be appointed if he is independent of the CD
    • Section 149 of Companies Act
    • not a related party of the CD
    • has not been an employee or proprietor or a partner of a firm of auditors, secretarial auditors or cost auditors of the CD
    • or of a legal or consulting firm 
      • has or had any transaction with the corporate debtor contributing 10% or more of the gross turnover of such firm. 
        • in the last three financial years.

4/2–Liquidator’s fee—as has been decided by the CoC before a liquidation order is passed under 33[1][a] or 33/2.

4/4–Liquidator shall be entitled to receive half of the fee payable on realization under sub-regulation [3] only after such realized amount is distributed.

5–Reporting–shall prepare and submit to AA–to preserve record 8 years 

  • preliminary report
  • an asset memorandum
  • progress report /s
  • sale report/s 
  • minutes of consultation with stake holders
  • final report prior to dissolution

6/1–Registers and Books of Accounts

Where books of account of the CD are incomplete on the liquidation commencement date, the liquidator shall have them completed and brought up-to-date with all the convenient speed as soon as the order for liquidation is passed.

7/2–Appointment of professionals–

  • not to be his relative
  • or related party of the CD
  • or served as an auditor to the CD
    • in the five years preceding the LCD.

8/1–Consultation with Stakeholders

  • Stakeholders shall extend all assistance and cooperation to L to complete LP
    • as mentioned in Section 35/2—[ Section 53–entitled to distribution  ]
  • liquidator to maintain record of any consultation with the stakeholders made under this Regulation as specified in Form A of Schedule II.

9/2–Personnel to extend cooperation to liquidator

  • officer, auditor, employee, promoter or partner of the CD or IRP / RP or previous liquidator of the CD
  • an application under this Regulation be made only after the liquidator has made reasonable efforts to obtain the information from such person & failed to obtain it. 

10–Disclaimer of onerous property

11–Extortionate credit transactions [ Section 50/2 ]

12–Public announcement by liquidator--within 5 days from the date of his appointment         in Form B—

12/2/b–claims submission —30 days from the LCD–as of LCD

[ Self Query–In Form B –column 6 and column 7 indicate that there could be a gap in date on which CIRP closes and LP commences–during the intervening period who guards the assets of the CD ? Is it the CD himself ? Moratorium is lifted as soon as CIRP closes ]

[ Self Query-Form C –serial no.3–quotes claim as principal plus interest as at LCD–what would be rate of interest where it has not been specifically agreed like in the case of operational creditors like suppliers / workers / employees ? ]

[ Self Query–Is the interest to be calculated at simple rate or compounding rate?] 

[ Self Query–Liquidator has the power to decide the claim including interest–whether any claimant has any remedy if his legitimate interest claim is  denied?] 

12/3—-one English +one regional language newspaper with wide circulation at the location of the registered office and principal office, if any, of the CD and any other location where in the opinion of the liquidator the CD conducts material business operations. + website of CD + on the website designated by the Board for this purpose

13–Preliminary Report to AA–within 75 days from LCD detailing

  • capital structure of the CD
  • estimates of its assets and liabilities as on LCD based on the books of CD
    • provided that if the liquidator has reasons to believe , to be recorded in writing, that the books of the CD are not reliable, he shall also provide such estimates based on reliable records and data otherwise available to him. 
  • whether he intends to make any further inquiry in to any matter relating to the promotion, formation or failure of the CD or the conduct of the business thereof. 
  • the proposed plan of action for carrying out the liquidation including the timeline within which he proposes to carry it out and the estimated liquidation costs. 

14–Early Dissolution 

  • anytime after the preparation of the Preliminary Report, the liquidator may apply to the AA for early dissolution of the CD and for necessary directions in respect of such dissolution,  if it appears to the liquidator that 
    • [1] the realizable properties of the CD are insufficient to cover the cost of the liquidation process 
    • and 
    • [2] the affairs of the CD do not require any further investigation. 

[ Self Query–assuming liquidator comes to the conclusion as indicated in [1] but feels further investigation is necessary contrary to what is mentioned in [2], does it mean the LP has to be on and should bleed further ? My view–would be better if —in the above example—-condition 1 is fulfilled regardless of what is Liquidator’s opinion in respect of serial no. 2 ]

15–Progress Reports  to AA

15/1–first progress report within 15 days after the end of the quarter in which he is appointed.

15/1–subsequent progress report within 15 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 up to the date of his so ceasing to act within 15 days of such cessation.  

15/2–A progress report shall provide all information relevant to liquidation for the quarter including :–

  • [a] Appointment, tenure of appointment and cessation of appointment of professionals.
  • [b] statement indicating progress in liquidation including
    • settlement of list of stakeholders
    • details of any property that remain to be sold and realized
    • distribution made to the stakeholders
    • distribution of unsold property made to the stakeholders
    • details of fee or remuneration including 
      • the fee due to and received by the liquidator together with a description of the activities carried out by him.
      • the remuneration or fee paid to professionals appointed by the liquidator together with a description of activities carried out by them. 
      • other expenses incurred by the liquidator whether paid or not.
      • developments in any material litigation by or against the CD
      • filing of , and developments in applications for avoidance of transactions in accordance with Chapter III of Part II of the Code
      • changes , if any, in estimated liquidation costs

15/3–A progress report shall enclose an account maintained by the liquidator showing

    • his receipts and payments during the quarter and
    • the cumulative amount of his receipts and payments since the LCD

15/4–A progress report shall enclose a statement indicating any material change in expected realization of any property proposed to be sold , along with the basis for such change. 

  • Provided that this statement shall not be accessible to any person during the course of liquidation unless permitted by AA
  • [ Self Query–accessibility–only the annexure or the entire progress report of that quarter or all progress reports ?
  • [ Self Query–under what circumstances AA may permit ? ]  

15/5–Progress Report for 4th quarter of the financial year shall enclose audited accounts of the liquidator’s receipts and payments for the financial year

  • Provided that in case an IP ceases to act as liquidator —-for that part of the year—-to be filed after cessation of his appointment.     

16–Proof of Claims–A person who claims to be a stakeholder , shall prove his claim for          debt or dues to him including interest, if any as on the LCD. 

17–Claims by operational creditors –Form C –other than a workman or employee

18–Claim by financial creditors —  Form D

19–Claims by workmen and employees– Form E + Form F in case of AR

20–Claim by other stakeholders — Form G

–Common documents to prove [ 17–18–19–20 ]

[a] In 17–20–records available with an IU or

[b] In 17–20—other relevant documents which adequately establish the debt                 including  any  or all of the following

[i] 17–contract for supply of goods and services with CD
[ In case of 19–Proof of Employment such as contract + evidence of notice + any other documentary or other proof showing the amount has not been paid  ] 

[ Exception In case of 19–L may admit the claims of a workman or an employee on the basis of the books of account of CD if such workman or employee has not made a claim ]

[ii] 17–invoice demanding payment
20-documentary evidence of notice demanding payment on unpaid amount OR bank statements of the claimant showing claim has not been paid AND an affidavit that the documentary evidence and bank statements are true,  valid and genuine. 
20–documentary or electronic evidence of his shareholding           
[iii] 17–20 an order of a Court or Tribunal that has adjudicated upon the non payment of a debt, if any and
[iv] 17–financial accounts 
[ In 18–FC–Financial Contract + financial statements + record evidencing amounts committed by FC have been availed +Financial statements showing debt has not been paid  ]

[iv] 17–20- an order of a court or tribunal that has adjudicated upon the non payment of a debt, if any.

21– Proving Security Interest—

  • IU,if any
  • RoC or 
  • Proof of registration with the Central Registry of Securitisation Asset Reconstruction and Security Interest of India

22–Production of Bills of exchange and promissory notes

  • where a person seeks to prove a debt in respect of BE, PN or other NI or security of a like nature for which the CD is liable, such BE, PN etc shall be produced before the L before the claim is admitted.

23–Substantiation of claims–Liquidator may call for evidence or clarification

24–Cost of Proof

  • [1] claimant shall bear the cost of proving its claim. 
  • [2] Verification and determination of a claim is done by L –Hence forms part of liquidation cost 
    • however, if false, then such claimant will bear
    • further L will inform to the Board. 

25–Determination of quantum of claim

If amount claimed by a claimant is not precise due to any reason, the L shall make the best estimate of the amount of the claim based on information available to him. 

26–Debt in Foreign Currency–Official exchange rate [reference rate by RBI ] as on LCD

27–Periodical Payments--Rent–Interest and such other payments of a periodical nature, a person may claim only for any amounts due and unpaid up to the LCD.

28/2–Debts payable at future time–

subject to any contract to the contrary —where a stakeholder has proved for a claim under sub-regulation 1, and the debt has not fallen due before distribution, he is entitled to distribution of the admitted claim reduced as follows —


where X is the value of the admitted claim—r is the closing yield rate [%] of government securities of the maturity of “n” on the date of distribution as published by RBI

where ” n ” is the period beginning with the date of distribution and ending with the date on which the payment of the debt would otherwise be due, expressed in years and months in a decimalized form.  

29–Mutual credits and set off

30–Verification of claims–within 30 days from the last date for receipt of claims and may either admit or reject in whole or in part– 

31–List of stakeholders

  • L shall prepare a list of stakeholders, category wise on the basis of  proofs of claims submitted and accepted under these Regulations with
    • claims admitted
    • extent to which the debts or dues are secured or unsecured
    • details of the stakeholders
    • proofs admitted or rejected in part and the proofs wholly rejected.
  • L shall file the list of stakeholders with the AA within 45 days from the last date of receipt of claims and the filing of the list shall be announced to the public in the manner specified in Regulation 12[3]
  • As per directions of AA, L may appropriately modify the list —on AA being approached by L after receipt of  additional information.
  • List of stakeholders modified from time to time shall be available for inspection
    • for those who filed proofs of claim.
    • for members, partners, directors and guarantors of CD
    • website of CD

32–Sale of Assets—L may sell

a. Standalone basis
b. slump sale
c. set of assets collectively
d. in parcels
e. CD as a going concern
f. the business[s] of the CD as a going conern







39–Recovery of monies dueL to endeavor to recover and realize all assets of and dues to the CD in a time bound manner for maximization of value for the stakeholders.




43–Return of money–stakeholder to return money to which he was not entitled

44–Completion of liquidation–within 24 months–otherwise he shall permission from AA to continue such liquidation –for such time —-by justifying such step

45–Final report prior to dissolution–

  • how the process was conducted
  • how CD’s assets were liquidated
  • justification for exceeding the liquidation cost as compared to projected in the preliminary report.
  • final report to form part of application to AA for the dissolution of the CD u/s 54.

46–Unclaimed proceeds or undistributed assets

  • To get an order from AA to deposit– unclaimed proceeds or undistributed assets or any other balance payable to the stakeholders as on the date of dissolution— into Companies Liquidation Account in the Public Account of India
  • L–while depositing amounts as above—–furnish to Board and authority with it is registered—name wise amounts due and last known addresses of stakeholders
  • unauthorized retention by L—will invite penalty and interest @12% p.a.
  • To get receipt from RBI for deposit made which shall act as discharge of the L in respect thereof.
  • Person claiming to be entitled to any money paid in Companies Liquidation Account–may apply to Board-–which if satisfied will may make an order after taking such security from him as it may think fit. 
  • If the amount remains unclaimed for 15 years, it shall be transferred to General Revenue Account of the Central Government. 

Schedule I –Mode of Sale [ Regulation 33 ]


  1. L shall prepare a marketing strategy [ with the help of marketing professionals, if necessary ]
    • releasing advertisements
    • preparing information sheets for the asset
    • preparing a notice for sale
    • liaising with agents.
  2. shall prepare terms and conditions of sale including
    • Reserve price [ in accordance with Reg 34 –not to be more than 6 months old ]
    • ———can be reduced to 75% of such value if auction fails at the Reserve Price
    • EMD
    • pre-bid qualifications
  3. shall make public announcement as specified in Reg 12/3—
    • however, he can dispense with this requirement keeping in view value of the asset intended to be sold–but after applying to AA 
  4. shall help ” due diligence ” by interested buyers
  5. shall sell through electronic auction on an online portal, if any, designated by Board—
    • where buyers can register, bid and receive confirmation on line.
    • where highest bid at any given point shall be visible to the other bidders.
    • where L feels an auction where bid amounts are not visible is likely to maximize realizations from the sale of assets and is in the  best interests of the creditors, he may apply to AA.
    • can conduct multiple rounds of auctions to maximize the realization from the sale of assets and to promote the best interests of the creditors.
  6. If L feels physical auction is likely maximize the realization from the sale of assets through physical auction
    • After AA’s permission
  7. Highest bidder to pay balance amount within 15 days–transfer formalities to take place thereafter specified in the terms of sale.

Private Sale

  1. May be conducted through directly liaising with potential buyers or their agents, through retail shops or through other means that is likely to maximize the realizations from the sale of assets.

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