IBBI Liquidation Process Reforms 2025: Key Changes and Impact Explained

Introduction

The Insolvency and Bankruptcy Board of India (IBBI) has enacted significant reforms through the Liquidation Process (Amendment) Regulations, 2025, and the Voluntary Liquidation (Second Amendment) Regulations, 2025, effective January 28, 2025. These reforms are designed to improve the efficiency and transparency of the liquidation process.

Key Updates in the Liquidation Process

1. Auction Process Reforms

• Extended Participation Window:
  The auction period for asset sales is now extended from 14 days to 30 days, promoting increased bidder participation.

• Eligibility Checks:
  Bidders must submit a declaration of compliance with Section 29A of the Insolvency and Bankruptcy Code (IBC) to disqualify wilful defaulters. Liquidators are required to verify the eligibility of the highest bidder (H1) within three days and must consult the Stakeholder Consultation Committee (SCC) before finalizing the results.

• Forfeiture Clause:
  If a bidder is deemed ineligible, their Earnest Money Deposit (EMD) will be forfeited.

2. Mandatory Use of Baanknet (eBKray) Platform

• Effective Date:
  From April 1, 2025, all asset auctions must be conducted through the Baanknet platform, formerly known as eBKray.

• Deadline for Ongoing Liquidations:
  Unsold assets in liquidation must be listed on Baanknet by March 31, 2025.

• Documentation Requirements:
  Bidders are required to submit their eligibility declarations and EMDs via the Baanknet platform.

3. Voluntary Liquidation Simplification

• Uncalled Capital:
  The new regulations permit voluntary liquidation to advance without needing to address uncalled or unpaid capital, thereby minimizing potential process delays.

4. Compliance and Transparency

• Electronic Filings:
  The IBBI's electronic forms for liquidation submissions are now compulsory. Delays in submissions will incur a penalty of ₹500 per month per form.

• Tax Disclosures:
  Liquidators must disclose any tax deductions before transferring unclaimed funds into liquidation accounts.

5. Asset Sales as a Going Concern

• Regulation 45 Amendment:
  This amendment stipulates that asset sales conducted as a going concern must comply with SCC consultations and valuation norms to ensure fairness and transparency.

  • Stakeholders’ Consultation Committee (SCC) Obligations:

    • Mandatory SCC advice for continuing or initiating legal proceedings (Regulation 31A(6A)).
    • SCC review of liquidation costs, legal proceedings, and process progress (Regulation 31A(6B)).

  • Valuation Transparency:
    Registered valuers must outline their methodology to the SCC prior to report finalization (Regulation 35). A 25% deviation in valuations must be justified.

  • Exclusion of Real Estate Assets:
    Assets with allottees in possession are excluded from the liquidation estate (Regulation 46A).

IBBI (Liquidation Process) (Amendment) Regulations, 2025 highlights include:

• Extension of the auction participation period from 14 to 30 days.
• Explicit forfeiture clauses for EMDs in auction notices.
• Verification of the highest bidder’s eligibility within three days, alongside SCC consultation.
• An e-filing mandate for liquidators, with penalties for delays.
• Requirement for tax deduction disclosures prior to depositing unclaimed dividends into the Corporate Liquidation Account.

Conclusion

The recent reforms introduced by the IBBI are aimed at streamlining the liquidation process while enhancing compliance and transparency. Stakeholders involved in liquidation procedures are encouraged to familiarize themselves with these new regulations to ensure smooth compliance and to maximize the benefits derived from these amendments.