The Insolvency and Bankruptcy Board of India, (IBBI) on October 20, 2023, issued a discussion Paper on Strengthening the Liquidation Process.
The following has been stated-
•The auction notice shall provide that the prospective bidders shall undertake that they are eligible under section 29A of the IBC, 2016 to participate in the auction process. It shall also provide that in case the bidder at any stage during the auction is found to be ineligible, his EMD shall stand forfeited by the liquidator.
•To ensure the confidentiality of the names of prospective bidders participating in the auction process, the manner in which earnest money is to be deposited by a prospective bidder shall be notified through a Circular by the Board.
•The Liquidator shall within 3 days of declaration of H1 bidder conduct due diligence and verification of the eligibility of the bidder, who stood as the H1 (highest) bidder in the auction process.
•The liquidator shall place before the SCC for its consideration under regulation 31A the result of the auction, the details of the highest bidder, due diligence conducted by him on its eligibility, and the result of such due diligence. In case the highest bid above the reserve price is not acceptable for any reason to the liquidator, the consultation with SCC shall be mandatory.
•Clause (4A) may be deleted from Schedule I which shall ensure that the reserve price in an auction is reduced by a maximum of 10% at a time.
•Clause (c) of Regulation 33 to be omitted. Further, Regulation 33(2) may be amended to provide that the liquidator may sell the assets of the CD by means of private sale only after the prior consultation with SCC and the successful buyer shall also be confirmed after such consultation.
•The regulations may provide that the liquidator should list all assets of the CD as per the Asset Memorandum, on a listing platform in the manner to be notified by the Board, which would significantly improve the visibility of assets, reduce information asymmetry, and simplify the process for potential bidders. Each asset listed should contain all material information about the assets such as status of attachment or lien, geographic coordinates, envisaged mode of sale, and likely date of auction. By listing assets much earlier than the auction date, the process would ensure greater engagement for the prospective bidders and the availability of more time with bidders for due diligence, leading to more competitive bidding.
•Comments may be submitted electronically by November 10, 2023.
[Notification No. IBBI/2022-23/GN/REG091]
