IBBI amends liquidation process regulations; liquidator’s fee to ‘depend’ on the work done

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A liquidator can claim fees only on the basis of the amount of work they have done during the liquidation process of a company, be it in terms of the amount realised or distributed, the Insolvency and Bankruptcy Board of India (IBBI) said in a notification on Wednesday.

When a company goes into liquidation under the Insolvency and Bankruptcy Code (IBC), generally, the committee of creditors (CoC) appoints a liquidator and decides on a fixed fee to be paid for their services.

However, in the absence of a fixed fee, IBBI regulations stipulate the liquidator’s fee as a percentage of the amount realised and distributed through the liquidation process.

To address uncertainties in such cases involving multiple liquidators, the IBBI has amended the liquidation process regulations.

“There have been instances where a liquidator realises the amount while another liquidator distributes the same to stakeholders,” the IBBI said in a release, adding, “The amendment made to the Regulations today clarifies that where a liquidator realises any amount, but does not distribute the same, he shall be entitled to a fee corresponding to the amount realised by him.”

Similarly, the opposite applies to a liquidator who distributed the amount but did not realise it.

The decision was made as situations arose where the liquidator had to be replaced as he fell sick, passed away or resigned midway during the process, said a person aware of the matter.

“Generally, the liquidator also wants clarity and they push the CoC to take a call on the fee so that there is no ambiguity. But now, if a liquidator joins the process in between, they know what to expect,” said Manoj Kumar, partner at Corporate Professionals.

Voluntary liquidation

In a simultaneous notification, the board amended the regulations for voluntary liquidation to enable a corporation to appoint an alternate liquidator at any point during the process through a resolution of members or partners, or contributories.

“In voluntary liquidation, there was no hard and fast rule of how the liquidator should be replaced, but in practice it was happening. So now this has been clarified,” Kumar said.

“The amendment made to the Regulations today provides that the corporate person may replace the liquidator by appointing another insolvency professional as liquidator by a resolution of members or partners, or contributories, as the case may be,” the IBBI said.

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