All about the Liquidation Estate under the IBC code
Table of Contents
What is meaning of Liquidation Estate under the IBC ?
Liquidation Estate (Sec 36)
- The liquidator shall form an estate of the assets mentioned in section 36(3), which shall be called the liquidation estate in relation to the corporate debtor.
- Liquidator shall hold the liquidation estate as a fiduciary for the benefit of all the creditors.
- CIRP COSTS due from secured creditors who realise their security interests in the manner provided in this section, shall be deducted from the proceeds of any realisation by such secured creditors, and they shall transfer such amounts to the liquidator to be included in the liquidation estate.
What is includes in the liquidation estate assets under the IBC?
Subject to section 36(4), the liquidation estate shall comprise all liquidation estate assets which shall include the following: –
- any assets over which the corporate debtor has ownership rights, including all rights and interests therein as evidenced in the balance sheet of the corporate debtor or an information utility or records in the registry or any depository recording securities of the corporate debtor or by any other means as may be specified by the Board, including shares held in any subsidiary of the corporate debtor;
- assets that may or may not be in possession of the corporate debtor including but not limited to encumbered assets;
- tangible assets, whether movable or immovable;
- intangible assets including but not limited to intellectual property, securities (including shares held in a subsidiary of the corporate debtor) and financial instruments, insurance policies, contractual rights;
- assets subject to the determination of ownership by the court or authority;
- any assets or their value recovered through proceedings for avoidance of transactions in accordance with this chapter;
- any-asset of the corporate debtor in respect of which a secured creditor has relinquished security interest;
- any other property belonging to or vested in the corporate debtor at the insolvency commencement date; and
- all proceeds of liquidation as and when they are realised.
What is not includes in the liquidation estate assets ?
Items not Covered Under liquidation estate assets
The following shall not be included in the liquidation estate assets and shall not be used for recovery in the liquidation: –
- assets owned by a third party which are in possession of the corporate debtor, including –
▶ assets held in trust for any third party;
▶bailment contracts;
▶ all sums due to any workmen or employee from the provident fund, the pension fund and the gratuity fund;
▶ other contractual arrangements which do not stipulate transfer of title but only use of the assets; and
▶ such other assets as may be notified by the Central Government in consultation with any financial sector regulator;
- assets in security collateral held by financial services providers and are subject to netting and set-off in multi-lateral trading or clearing transactions;
- personal assets of any shareholder or partner of a corporate debtor as the case may be provided such assets are not held on account of avoidance transactions that may be avoided under this Chapter;
- assets of any Indian or foreign subsidiary of the corporate debtor; or
- any other assets as may be specified by the Board, including assets which could be subject to set-off on account of mutual dealings between the corporate debtor and any creditor.
Presumption of Security Interest Regulation 21 A
- A secured creditor shall inform the liquidator of its decision to relinquish its security interest to the liquidation estate or realise its security interest, as the case may be, in Form C or Form D of Schedule II
- Provided that, where a secured creditor does not intimate its decision within thirty days from the liquidation commencement date, the assets covered under the security interest shall be presumed to be part of the liquidation estate.
- Where a secured creditor proceeds to realise its security interest, it shall pay as much towards the amount payable under clause (a) and sub-clause (i) of clause (b) of sub-section(1) of section 53, as it would have shared in case it had relinquished the security interest.
OPTIONS OF SECURED CREDITORS IN LIQUIDATION PROCEEDINGS:
- Relinquish its security interest to the liquidation estate and receive proceeds from the sale of assets by the liquidator in the manner specified in section 53
- Realize its security interest UNDER SECTION 52(1)(b)
- Realize-its security interest UNDER SARFAESI OR RECOVERY OF DEBTS AND BANKRUPTCY ACT 1993
What are the power of Liquidator to access information on liquidation estate assets?
Power of Liquidator to access information on liquidation estate assets Section 37
The Liquidator shall have the power to access any information systems for the purpose of admission and proof of claims and identification of the liquidation estate assets relating to the corporate debtor from the following sources, namely:-
- an information utility;
- credit information systems regulated under any law for the time being in force;
- any agency of the Central, State or Local Government including any registration authorities;
- information systems for financial and non-financial liabilities regulated under any law for the time being in force:-
- information systems for securities and assets posted as security interest regulated under any law for the time being in force;
- any database maintained by the Board; and
- any-other source as may be specified by the Board.
The creditors may require the liquidator to provide them any financial information relating to the corporate debtor .
Liquidator shall provide information to such creditors who have requested for such information within a period of seven days from the date of such request or provide reasons for not providing such information.
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Services in the field of Insolvency Laws
- Services as ‘Insolvency Professionals’
- Team of Experts to act as an ‘Insolvency Professional’.
- Equipped with the required infrastructure to take control of Corporate Debtor and to make a meaningful concern in the long run.
- Cash flow monitoring and coordinating with banks
- Drafting & vetting of Expression of Interest, Information Memorandum and Evaluation Matrix
- Expert team for filing and Verification of claims
- Drafting and Filing reports with the Adjudicating Authority (NCLT)
- Filing of replies and applications with the Adjudicating Authority as and when the situation demands.
- Equipped with necessary Infrastructure to Liquidate the Corporate Debtors-
- Assist in Valuation & Forensic audit/Transaction audit, Assist in Sale of the corporate debtor as going concerned
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