 "IBC, insolvency, bankruptcy, NCLT, company, firms")
Liquidators need to ensure that financial service providers have the requisite permission from their respective regulator before commencing voluntary liquidation process under the insolvency law.
The Insolvency and Bankruptcy Board of India (IBBI) on Tuesday issued a circular in this regard amid instances of Financial Service Providers (FSPs) commencing voluntary liquidation process without requisite approvals.
Under the Insolvency and Bankruptcy Code (IBC), the definition of corporate persons excludes any FSP.
FSPs notified by the central government after consulting financial regulators are allowed to undergo a voluntary liquidation process after obtaining prior permission of the appropriate regulator.
The requirement is part of the Insolvency and Liquidation Proceedings of Financial Service Providers and Application to Adjudicating Authority Rules, 2019.
According to IBBI, it has been noted that some FSPs have commenced the voluntary liquidation process without notifying the regulator or taking prior permission.
Against this backdrop, the regulator has directed that in case of a FSP, the liquidator concerned should declare the category under which the particular FSP has been notified by the central government.
Also, the liquidator has to ensure that FSP concerned has "obtained prior permission from the appropriate regulator" for voluntary liquidation, as per the circular.
