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New Delhi: Businesses seeking to wind up operations voluntarily under the bankruptcy code will have to reveal all pending litigation and regulatory assessments and ensure that the financial obligations from those proceedings are sufficiently provided for, according to a proposal by the bankruptcy regulator.
The idea is to cut the time needed to process voluntary exits with greater disclosures at the time of making an application.
The proposal is part of a new set of regulations on which the Insolvency and Bankruptcy Board of India (IBBI) has sought public feedback by 26 October.
IBBI said that around half of the ongoing cases of liquidation have been continuing for more than a year. The regulator said that pending appeals regarding demands or penalties, refund from statutory departments and other instances of litigation are found to be the cause of delays.
The directors of the entity initiating liquidation should disclose at that time “pending proceedings or assessments before statutory authorities, and pending litigation”.
It should ensure “sufficient provision has been made to meet the obligations arising, if any, on account of these pending matters,” said the regulator.
“The proposed amendments would provide requisite clarification to the stakeholders with regard to the initiation of the (voluntary liquidation) process. The new disclosures shall ensure that both the liquidator and the corporate person are aware about the pending issues and the corporate person make necessary provisioning for the same,” the regulator said in a discussion paper.
It has also brought out a draft of the IBBI (Voluntary Liquidation Process) (Amendment) Regulations, 2023, for public feedback.
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Updated: 07 Oct 2023, 05:04 AM IST
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