You are here: Home » Companies » News
Business Standard

IBBI allows transfer of illiquid assets and debt for quicker case closure

The rules come at a time when the liquidation process takes much longer than envisaged under IBC

Topics
IBBI | Insolvency and Bankruptcy Code | liquidation

Ruchika Chitravanshi  |  New Delhi 

gavel, IBC, Insolvency, bankruptcy, court, judgement, laws
The bankruptcy regulator has defined “not readily realisable asset” as any asset included in the liquidation estate which could not be sold through available options.

The insolvency and bankruptcy board of India (IBBI) has notified the rules allowing a liquidator to assign not readily realisable assets or illiquid assets to third parties in order to facilitate quick closure of the process.

If there is a creditor who is not willing to wait for completion of process for realisation of his debt, has enabled such a creditor to “assign or transfer the debt due to it to any other person in accordance with the law.”

The rules come at a time when the process takes much longer than envisaged under the (IBC). has enabled the liquidator to assign illiquid assets to any person in consultation with the stakeholders’ committee. This shall be done only after the liquidator has failed to sell the assets in the first instance.

Such a transfer, says, has to be made in a transparent manner to any person who is eligible to submit a resolution plan for insolvency resolution of the corporate debtor.

The bankruptcy regulator has defined “not readily realisable asset” as any asset included in the liquidation estate which could not be sold through available options. This includes contingent or disputed assets, and assets underlying proceedings for preferential, undervalued, extortionate credit and fraudulent transactions.

IBBI notification also says if the liquidator fails to assign the assets, he may distribute the undisposed assets amongst stakeholders, with the approval of the adjudicating authority.

ALSO READ: T Rowe Price signs agreement to acquire majority stake in UTI Trustee

“Actionable claims are marketable instruments and can be sold at a certain amount...

While it will be difficult to get immediate buyers, and are willing to buy debt with some discount due to risk factors,” said Manoj Kumar, partner, Corporate Professionals.

As of June, 2020 of the total admitted 3,911 IBC cases 955 were closed by liquidation. Of these 955, the final report has been submitted in 88 cases only while another 867 are still ongoing.

While more than 100 cases have been undergoing the liquidation process for more than two years, another 324 have been ongoing for more than a year.

IBBI expects that over a period of time, a market for such assets may develop, which, in turn, would lead to better price discovery and provide greater business and employment opportunities through assignees.

Experts also said that if banks are able to transfer the debt once the company has moved to liquidation, it can be easily acquired at a much lower rate. “The amendments are a welcome change to the existing liquidation regime…It will help in creating a niche market where sophisticated or deep pocket buyers can pick up otherwise illiquid assets. The assignees however, will have to satisfy the eligibility test applicable on resolution applicants in the insolvency,” Rajeev Vidhani, Partner, Khaitan & Co said.

IBBI had earlier in its proposal said that the assignment of debt by a creditor under liquidation process to a third party, with greater financial capacity may lead to improvement in allocation of resources in the economy. It said in its proposal that in the event of liquidation, creditors with low financial capacity or those in the process of cleaning their balance sheet may be interested in getting their dues instantly, even at a discounted value, rather than waiting for a longer period to receive higher pay-out.

Dear Reader,


Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.
We, however, have a request.

As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.

Support quality journalism and subscribe to Business Standard.

Digital Editor

First Published: Wed, November 18 2020. 20:03 IST
RECOMMENDED FOR YOU
.