The Insolvency and Bankruptcy Board of India notified the Insolvency and Bankruptcy Board of India (Liquidation Process) (Second Amendment) Regulations, 2022 (‘Amendment Liquidation Regulations’) and Insolvency and Bankruptcy Board of India (Voluntary Liquidation Process) (Second Amendment) Regulations, 2022 (‘Amendment Voluntary Liquidation Regulations’) on 16th September, 2022.
To enable better participation of stakeholders and streamline the liquidation process to reduce delays and realise better value, the amendment in Liquidation Regulations make the following major modifications:
The Committee of Creditors (CoC) constituted during Corporate Insolvency Resolution Process (CIRP) shall function as Stakeholders Consultation Committee (SCC) in the first 60 days. After adjudication of claims and within 60 days of initiation of process, the SCC shall be reconstituted based upon admitted claims.
The liquidator has been mandated to conduct the meetings of SCC in a structured and time bound manner with better participation of stakeholders.
The scope of mandatory consultation by liquidator, with SCC has been enlarged. Now, SCC may even propose replacement of liquidator to the Adjudicating Authority (AA) and fix the fees of liquidator, if the CoC did not fix the same during CIRP.
If any claim is not filed during liquidation process, then the amount of claim collated during CIRP shall be verified by the liquidator.
Wherever the CoC decides that the process of compromise or arrangement may be explored during liquidation process, the liquidator shall file application only in such cases before Adjudicating Authority for considering the proposal of compromise or arrangement, if any, within thirty days of the order of liquidation.
Specific event-based timelines have been stipulated for auction process.
Before filing of an application for dissolution or closure of the process, SCC shall advice the liquidator, the manner in which proceedings in respect of avoidance transactions or fraudulent or wrongful trading, shall be pursued after closure of liquidation proceedings.
The Amendment Liquidation Regulations and Amendment Voluntary Liquidation Regulations further lay down the manner and period of retention of records relating to liquidation and voluntary liquidation of a corporate debtor or corporate person, respectively.
The Amendment Liquidation Regulations and Amendment Voluntary Liquidation Regulations are effective from 16th September, 2022. These are available at http://www.mca.gov.in and www.ibbi.gov.in.
MCA21 version-3.0 is a technology-driven forward-looking project, envisioned to strengthen enforcement, promote Ease of Doing Business and enhance user experience. MCA21 version-3.0 rollout has been planned in phases to ensure minimum disruption in regulatory filings.
09 company forms (CHG-1, CHG-4, CHG-6, CHG-8, CHG-9, DIR-3 KYC, DIR-3 KYC WEB, DPT-3 and DPT-4) are scheduled to go-live on 01.09.2022 (00:00 hrs). Remaining company forms and other modules like e-Adjudication, Compliance Management System are scheduled to be fully deployed within this Calendar Year.
In view of the upcoming launch of 09 Company forms in version-3, LLP filings on MCA21 V-3 portal will not be available from 27th Aug (00:00AM) to 28th Aug (23:59hrs). However, MCA21 V-2 Portal for company filings will remain available.
Frequently asked questions (FAQs) and demo for these 09 forms are available on the website of MCA (www.mca.gov.in). Several webinars have been conducted to sensitise all stakeholders in association with Institute of Chartered Accountants of India (ICAI) and Institute of Company Secretaries of India (ICSI).
Phase-1 of rollout was completed on 24th May 2021 with launch of e.Book, e. Consultation Modules and a revamped website.
As part of Phase-2, LLP Module for supporting all LLP filings was launched on 08th March 2022.
*MCA 21 Version 3 (MCA Press Release dated 24th Aug 2022)*
Section 248 of the Companies Act, 2013 (the Act) provides for removal of name of company from the Register of companies, if it is not carrying on any business or operation for a period of 2 immediately preceding financial years and has not made any application within the said period for obtaining the status of a Dormant Company under section 455 of the Act. This was stated by the Union Minister of State for Corporate Affairs Shri Rao Inderjit Singh in a written reply to a question in Lok Sabha today.
The removal of the name of the company from the Register of Companies is a continuous process and a total of 4,32,796 companies have been struck off during last five years and its year wise details are as under:
The Minister stated that there is no rule making power provided under section 59 ‘Voluntary liquidation for corporate persons’ in the Insolvency and Bankruptcy Code, 2016. A dormant company is covered under the provisions of section 455 of the Act, the Minister stated.
The number of Companies having dormant status as per such provisions, during the last five years are as under:
As per information provided by the Department for Promotion of Industry and Internal Trade, no such measure has been taken to address industrial sickness.
The Insolvency and Bankruptcy Board of India (Grievance and Complaint Handling Procedure) Regulations, 2017 enable stakeholders to file a grievance or a complaint against service providers under the IBC. This was stated by the Union Minister of State for Corporate Affairs Shri Rao Inderjit Singh in a written reply to a question in Lok Sabha today.
Besides this, the Minister stated, Insolvency and Bankruptcy Board of India (IBBI, the Regulator) also receives complaints and grievances from Centralized Public Grievance Redress and Monitoring System (CPGRAM), Prime Minister’s Office, MCA and other authorities. Till 31st July, 2022, the IBBI had received 6,231 such complaints and grievances, of which 6,172 have been disposed after examination.
The Minister said that the Ministry of Corporate Affairs does not have any role in corporate insolvency resolution process (CIRP) of a corporate debtor (CD) under the provisions of the Insolvency and Bankruptcy Code, 2016 (the Code). CD undergoing CIRP is resolved through a resolution plan formulated by resolution applicants based on market driven process.
The Minister further stated that the Committee of Creditors (CoC) within its commercial wisdom assesses the feasibility and viability of the resolution plan submitted by the proposed resolution applicant which is then approved by the Adjudicating Authority (AA). Further, the realisation by creditors through CIRP under the Code is dependent on quality assets at the time of its resolution, the Minister stated.
Giving more details, the Minister stated that no such investigation has been initiated as section 29A of the Code enlists certain categories of undesirable persons which include related parties ineligible to submit a resolution plan during the CIRP. Regulation 36A(8) of IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 imposes a duty on Resolution Professional (RP) to conduct due diligence to satisfy themselves that the prospective resolution applicant is not ineligible under section 29A of the Code. The resolution plan approved by the CoC, within its commercial wisdom is then approved by AA under section 31 of the Code thereby ensuring that any undesirable persons under section 29A are unable to take over the CD. Likewise, during liquidation proceedings of CD, the proviso to Section 35(1)(f) bars a liquidator from selling immovable and movable property to any person who is ineligible to be a resolution applicant.
Further, the Minister stated that as per information available, Directorate of Enforcement has received one complaint against an RP of one CIRP in which appropriate action under applicable law has been taken. Further, CBI has received one complaint regarding abuse of process in one CIRP matter which was forwarded to the Regulator and on examination, the Regulator has not found any actionable material.
Limited Liability Partnership (LLP) and Companies are incorporated under the Ministry of Corporate Affairs as per the provisions of LLP Act, 2008 and Companies Act, 2013. This was stated by Union Minister of State for Corporate Affairs Shri Rao Inderjit Singh in a written reply to a question in Lok Sabha today.
Giving more details, the Minister stated that during FY 2021-22, 1,67,080 companies were registered as compared to 1,55,377 in the previous year. Further, during FY 2020-21, 43,050 LLPs were registered as compared to 42,187 in previous year.
On National Financial Reporting Authority (NFRA), the Minister stated that the Company Law Committee constituted by the Ministry of Corporate Affairs in its report of March, 2022 (Chapter 1 Para 11) has inter-alia, recommended that NFRA be empowered to take appropriate action against other contraventions under NFRA Rules, 2018, in addition to its existing powers to take action against ‘professional or other misconduct’. The report is available on the website of Ministry of Corporate Affairs (www.mca.gov.in), the Minister stated.
MCA is launching first set of Company Forms on MCA21 V3 portal effective from 31st Aug 2022.
Following forms will be rolled-out in this phase: DIR3-KYC Web, DIR3-KYC Eform, DPT-3, DPT-4, CHG-1, CHG-4, CHG-6, CHG-8 & CHG-9. To facilitate implementation of these forms in V3 MCA21 portal, stakeholders are advised to note the following points:
(1).Company e-Filings on V2 portal will be disabled from 15th Aug 2022 12:00 AM for the above 9 forms. All stakeholders are advised to ensure that there are no SRNs in pending payment and Resubmission status.
(2).Offline payments for the above 9 forms in V2 using Pay later option would be stopped from 07th Aug 2022 12:00 AM. You are requested to make payments for these forms in V2 through online mode (Credit/Debit Card and Net Banking)