IBBI suggests that businesses should report ongoing legal matters while declaring bankruptcy

 IBBI suggests that businesses should report ongoing legal matters while declaring bankruptcy

New Delhi: According to bankruptcy regulator IBBI, companies that want to voluntarily dissolve under the bankruptcy law should be required to disclose any ongoing legal disputes and regulatory inspections and make sure that their financial responsibilities arising from these actions are covered.

The goal is to speed up the processing of company departures that are done voluntarily by making bankruptcy filings necessitate more information. The IBBI (Voluntary Liquidation Process) (Amendment) Regulations, 2023, are a new set of regulations for which the regulator has asked for input from the public by October 26.

According to IBBI, more than half of the active liquidation cases have been going on for over a year. The regulator said that the primary reasons for delays include outstanding appeals about requests or fines, reimbursements from statutory authorities, and other cases of litigation.

In addition to disclosing "pending proceedings or assessments before statutory authorities, and pending litigation," the regulator advised the directors of the entity that was initiating liquidation to make sure "sufficient provision has been made in fulfilling the obligations arising, if any, as a result of these pending matters."

“The the suggested modifications would provide requisite clarification to everyone involved with regard to the initiation of the (voluntary liquidation) process. According to the regulator's consideration paper, the new disclosures must guarantee that both the liquidator and the corporate person are informed of the outstanding concerns and that they make the required provisions for them.