Important clarification on liquidators’ fee
The Insolvency and Bankruptcy Board of India (IBBI) has clarified that in case where a liquidator realizes any amount but does not distribute the same, he will be entitled to a fee corresponding to the amount realised by him. In case where a liquidator distributes any amount, which is not realised by him, he will be entitled to a fee corresponding to the amount distributed by him.
The clarification has been added to the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016, regulation 4, in sub-regulation (2).
Earlier, the regulations required the committee of creditors to fix the fee payable to the liquidator. Where the fee has not been fixed by the committee of creditors, the regulations provided for a fee as a percentage of the amount realised and of the amount distributed by the liquidator. There have been instances where a liquidator realises the amount while another liquidator distributes the same to stakeholders.
Therefore, it has been clarified 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. Likewise, where a liquidator distributes any amount, which is not realised by him, he shall be entitled to a fee corresponding to the amount distributed by him.
The change will come into force from 5 August 2020.
