Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016 notified;



 The Insolvency and Bankruptcy Board of India notifies Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016 notified;

Regulations to come into force with immediate effect; Regulations inter alia provide for the details of activities from issue of liquidation order under Section 33 of the Code to dissolution order under Section 54.


The Insolvency and Bankruptcy Board of India (Board), in exercise of its powers conferred under Section 240 of the Insolvency and Bankruptcy Code, 2016 (Code), has notified the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016. These Regulations inter alia provide for the details of activities from issue of liquidation order under Section 33 of the Code to dissolution order under Section 54.These Regulations come into force with immediate effect.

These Regulations prohibit an insolvency professional from acting as a liquidator for a corporate debtor if he is not independent of the corporate debtor. These prohibit partners or directors of an insolvency professional entity of which the insolvency professional is a partner or director from representing other stakeholders in the same liquidation process. These oblige the liquidator, and also registered valuer (s) and professional(s) assisting him in liquidation to make disclosures - initial and continuing – about pecuniary or personal relationship with any of the stakeholders entitled to distribution of assets.

These Regulations specify the manner and contents of public announcement, receipt and verification of claims of stakeholders, reports and registers to be maintained, preserved and submitted by the liquidator, the manner of realisation of assets and security interest, and distribution of proceeds to stakeholders.

These Regulations provide that a liquidator should ordinarily sell the assets through auctions. He may sell the assets through private sale only when the asset is perishable; the asset is likely to deteriorate in value significantly if not sold immediately or the asset is sold at a price higher than the reserve price of a failed auction. He may sell an asset on standalone basis, or assets in a slump sale, assets in parcels or a set of assets collectively.

These Regulations provide that the fee payable to a liquidator shall form a part of liquidation cost. These further provide that a liquidator shall be paid such fees and in such manner as has been decided by the committee of creditors during the resolution process. In all other cases, the liquidator shall be entitled to a fee as a percentage of the amount realised net of other liquidation costs and of the amount distributed.

These Regulations are available at www.mca.gov.in and www.ibbi.gov.in



http://www.ibbi.gov.in/Law/IBBI%20(Liquidation%20Process)%20Regulations,%202016%2015%20DEC.pdf

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Annual Filing by Corporates

The Ministry had extended the last date of financial statement and annual return vide circular no. 08/2016 and 12/2016 upto 29.10.2016 and 29.11.2016 respectively keeping in view the representations received from stakeholders to allow more time for filing the above mentioned returns/statement on account of extension of income tax return due date, revision of XBRL taxonomy to include changes on account of amendments in Corporate Social Responsibility (CSR) and Companies Auditor’s Report Order (CARO) related reporting requirements. Further, this Ministry had vide circular no. 14/2016 extended the last date for annual filing of returns for the State of Jammu & Kashmir upto 31.12.2016 on the request of stakeholders.

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Contribution to Political Parties

Contributions to political parties are governed by Section 182 of the Companies Act, 2013. A company that is not a Government company and which is in existence for at least last three financial years may contribute up to 7.5% of its average net profits during the last three years to a political party/parties registered under the representation of Peoples Act, 1951. This is subject to further elaborations, disclosures and restrictions in the said section. A company can also make contributions within the above limits and restrictions to ‘Electoral Trust Companies’ and reflect these contributions in their books of accounts. The provisions of Section 182 are not applicable to foreign companies.

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 Capital structure of Nidhi Companies

Recommendations made by various Expert Groups or Committees on Nidhis related matters were duly examined/considered by the Government while prescribing Nidhi Rules, 2014. As per Nidhi Rules, 2014 issued under section 406 of the Companies Act, 2013, a Nidhi company shall be a public company and shall have a minimum paid up equity share capital of five lakh rupees. Nidhi companies shall not issue preference shares, debentures or any other debt instrument by any name or in any form whatsoever. A Nidhi company shall not admit a body corporate or trust as a member. Further, every Nidhi company shall, within a period of one year from the commencement of Nidhi Rules, 2014, ensure that it has not less than two hundred members and that it has Net Owned Funds of ten lakh rupees or such higher amount as the Central Government may specify.

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Early Warning System to Detect Fraud

Serious Fraud Investigation Office (SFIO) of this Ministry is in the process of developing ‘Early Warning System’ (EWS) for early identification and pre-intimation/ warning system to detect financial frauds in the country. For this purpose, services of a consulting agency have been engaged to develop the conceptual framework. The development of EWS is an iterative process. The system will show results after the framework under development stabilises.

There is no scheme in existence for facilitating rehabilitation/ compensation to the affected people/ victims under the provisions of Companies Act, 2013.

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Growth of Corporate Sector

The growth of Indian corporate sector in terms of number of active companies for the financial year 2013-14, 2014-15, 2015-16  and 2016-17( up to 30.11.2016) is as under:

Number of active companies
As on 31st March     Number
2014            9,52,433
2015            10,22,011
2016            10,88,780
2016*            11,36,794

*As on 30.11.2016

The impact of corporate growth on employment scenario in the country has not been assessed.

The Ministry of Corporate Affairs has taken a number of measures to promote growth of corporate sector and improve ease of doing business in the Country. These include, inter alia, (i) doing away with the payment of minimum paid up capital at the time of incorporation as well as declaration of commencement of business by the companies, (ii) mandatory common seal for companies is made optional, (iii) setting up of Central Registration Centre (CRC) for name availability and incorporation/registration of companies as a part of government process re-engineering (GPR), (iv) deployment of Simplified Proforma for Incorporating Company electronically (SPICe), and (v) granting of various exemptions/relaxations from the provisions of the Companies Act, 2013 to companies including startups, subject to certain conditions.

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Action against defaulting companies under various provisions of the Companies Act, 1956

Ministry of Corporate Affairs has taken following actions against NSEL and its promoters and the defaulting companies under various provisions of the Companies Act, 1956:

(i)         Ordered inspection under section 209A of the Companies Act, 1956 of books of accounts and other records of NSEL, Financial Technologies (India) Limited (FTIL - now name changed to 63 Moons Technologies Limited) vide order dated 30-09-2013;

(ii)        Issued Order dated 12-02-2016 of Amalgamation of NSEL with FTIL under section 396 of the Companies Act, 1956 in public interest;

(iii)       Filed an application before Company Law Board (now National Company Law Tribunal) under sections 397-398 read with 388B, 401, 402, 403, 406 and 408 of the Companies Act, 1956 seeking inter alia removal of directors from the Board of Directors of FTIL and praying for suitable interim reliefs;

(iv)       Ordered investigation under Section 210(1) read with Section 212(1) (c) of the Companies Act, 2013 into the affairs of NSEL, FTIL, their 18 subsidiaries and associate companies, the 20 defaulting entities and their role/ nexus with the brokers vide order dated 28-10-2016 and assigned the same to the Serious Fraud Investigation Office (SFIO).

            Department of Economic Affairs, Ministry of Finance has constituted a Special Team of Secretaries (STS) to examine the violation of laws and regulations by NSEL/ associated companies and to suggest measures that could be taken to ensure that there is no systemic impact of the NSEL development.  The Committee had submitted its Report on 23-09-2013 and the issues highlighted in the Report are being investigated by the agencies/ Departments/ Ministry concerned. The progress in this connection is reviewed from time to time by the Committee in its meetings with the agencies/ Departments/ Ministry concerned.

            In the last three years and the current year (up to 30-11-2016), the Ministry has invoked provisions of section 396 of the Companies Act, 1956 in public interest in the matter of amalgamation of NSEL with FTIL.

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Simplified Proforma for Incorporating Company Electronically (SPICe)

The Ministry had notified a new e-form called Simplified Proforma for Incorporating Company Electronically (SPICe), on the occasion of Gandhi Jayanti 2016, with the specific objective of providing speedy incorporation related services within stipulated time frames which are in line with international best practices. SPICe is a Simplified electronic form for Company Incorporation with a number of new functionalities, designed to facilitate ease of incorporation.

Whenever any stakeholder encounters any technical problem, a ticket is raised by him/her for resolution of the same. These tickets are re-solved by the service provider within specified timelines and is a continuous process.
Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016 notified; Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016 notified; Reviewed by Ajit Kumar on 7:09 PM Rating: 5

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