IBBI Liquidation Amendments 2026: CoC Role
Reviewed by Industry Experts & Startup Specialists.
Last Updated:
Overview of IBBI Liquidation Amendments 2026
The Insolvency and Bankruptcy Board of India (IBBI) has introduced comprehensive amendments to the IBBI (Liquidation Process) Regulations in 2026, addressing long-standing issues in the corporate liquidation framework under the IBC. These amendments are the most significant reform to the liquidation process since the IBC's enactment in 2016.
The key objectives of the 2026 amendments are:
- Time-bound completion: Introducing a 1-year statutory deadline for liquidation (currently averaging 3 to 5 years)
- CoC oversight: Giving the Committee of Creditors a formal advisory role in liquidation decisions
- Going concern priority: Mandating that going concern sale be attempted before piecemeal liquidation
- Transparency: Enhancing reporting requirements and stakeholder access to information
- Value maximisation: Reforming asset sale procedures to achieve higher realisations
Liquidation Statistics: Why Reform Was Needed
| Metric | Pre-Amendment (2022 to 2025) | Target Post-Amendment |
|---|---|---|
| Average liquidation duration | 3.5 years | 10 to 12 months |
| Going concern sale rate | 8% of cases | 25% to 30% of cases |
| Average recovery rate (liquidation) | 5% to 8% of admitted claims | 15% to 20% of admitted claims |
| Cases pending beyond 2 years | 45% of all liquidation cases | Less than 10% |
| Stakeholder complaints to IBBI | 2,200+ annually | Reduced by 50% |
Enhanced CoC Role in Liquidation
The most significant change in the 2026 amendment is the formal introduction of CoC advisory oversight in liquidation proceedings. Previously, once the NCLT ordered liquidation (under Section 33), the CoC's role effectively ended and the liquidator operated with near-complete autonomy.
CoC Advisory Powers (New)
| Area | Previous Position | After 2026 Amendment |
|---|---|---|
| Asset sale strategy | Liquidator decided independently | CoC advises on strategy; liquidator must consider advice |
| Reserve price approval | No CoC involvement | CoC reviews and comments on reserve price; NCLT decides if dispute |
| Going concern sale attempt | Discretionary | Mandatory; CoC can propose going concern sale terms |
| Liquidation costs | Liquidator approved own costs | CoC reviews quarterly cost statements |
| Avoidance transaction pursuit | Liquidator's discretion | CoC can recommend specific avoidance actions |
| Litigation decisions | Liquidator decided | CoC advises on continuation or withdrawal of pending cases |
| Progress reporting | To NCLT only | To NCLT, IBBI, CoC, and stakeholder consultation committee |
Limitations of CoC Advisory Role
The CoC's role in liquidation is advisory, not decisional. The liquidator retains the final authority on liquidation decisions. The CoC cannot veto or override the liquidator. However, if the liquidator consistently ignores CoC advice without reasonable justification, the CoC can:
- File an application before NCLT seeking directions
- Report the liquidator to IBBI for disciplinary action
- Request NCLT to replace the liquidator under Section 34(4)
Revised Asset Sale Framework
The 2026 amendments overhaul the asset sale process in liquidation to maximise realisation value:
Sale Hierarchy (Mandatory Order)
- Sale as a going concern (first 6 months): The liquidator must attempt to sell the entire business as a going concern, preserving jobs and operational value. This includes marketing to potential buyers, inviting expression of interest (EOI), and conducting a formal bidding process
- Sale of business divisions (months 7 to 9): If whole business sale fails, the liquidator attempts to sell identifiable business divisions or profit centres separately as going concerns
- Sale of assets in slump (months 9 to 10): Group related assets together and sell as a bundle (e.g., all plant and machinery together, all real estate together) to achieve better pricing than individual sale
- Piecemeal sale (months 10 to 12): Individual asset sale through e-auction platform as a last resort
E-Auction Requirements
| Requirement | Detail |
|---|---|
| Platform | IBBI-approved e-auction platform (currently MSTC, CGTMSE, or bank-operated platforms) |
| Publicity | Minimum 30 days before auction; notice in 2 national + 1 regional newspaper + IBBI portal |
| Reserve price | Determined by registered valuer; fair market value or liquidation value (whichever is higher) |
| Bid increment | Minimum 5% of reserve price |
| EMD (Earnest Money Deposit) | 10% of bid amount |
| Payment terms | 25% within 30 days of auction; balance within 90 days |
| Multiple auction rounds | Maximum 3 rounds with 15% reserve price reduction per round |
Stakeholder Consultation Committee
The 2026 amendment introduces a formal Stakeholder Consultation Committee (SCC) to replace informal creditor interactions during liquidation:
SCC Composition
- Financial creditors: Representatives of the top 5 financial creditors by claim amount (or all financial creditors if fewer than 5)
- Operational creditors: One representative elected by all operational creditors with admitted claims
- Workmen: One representative elected by workmen and employees of the corporate debtor
- Promoters/directors: One representative of the erstwhile promoters or directors (observer status only, no voting rights)
- Government: One representative of the central or state government if there are statutory dues exceeding ₹10 crore
SCC Functions
- Review quarterly progress reports from the liquidator
- Advise on asset sale strategy and reserve pricing
- Recommend going concern sale proposals to the liquidator
- Raise concerns about liquidation costs and timeline
- Provide input on treatment of disputed claims
- Recommend avoidance transaction actions to the liquidator
SCC Meeting Requirements
| Meeting Type | Frequency | Notice Period | Quorum |
|---|---|---|---|
| Regular quarterly meeting | Every 3 months | 14 days | 3 members (including at least 1 financial creditor) |
| Special meeting | As needed | 7 days | 3 members |
| Emergency meeting | Urgent matters only | 48 hours | 2 members |
Timeline Management: The 1-Year Deadline
The 1-year liquidation deadline is the most practically significant change in the 2026 amendments. Here is how the timeline is structured:
Phase-Wise Liquidation Timeline
| Phase | Duration | Key Activities |
|---|---|---|
| Phase 1: Setup | Days 1 to 30 | Public announcement, claim filing invitation, asset inventory, SCC formation |
| Phase 2: Claims | Days 31 to 90 | Claim verification, admission/rejection, communication to claimants |
| Phase 3: Going Concern Sale | Days 91 to 180 | EOI invitation, bid process, due diligence by potential buyers |
| Phase 4: Alternative Sale | Days 181 to 300 | Division sale, slump sale, or piecemeal e-auction |
| Phase 5: Distribution | Days 301 to 330 | Realisation of sale proceeds, distribution per Section 53 waterfall |
| Phase 6: Closure | Days 331 to 365 | Final report to NCLT, dissolution application, account closure |
Extension Mechanism
If the liquidator cannot complete liquidation within 1 year, they must file a detailed extension application with NCLT explaining the reasons for delay, remaining activities, and a concrete completion plan. The NCLT can grant a maximum 90-day extension. Factors that justify extension include pending litigation, disputed claims under adjudication, incomplete avoidance transaction proceedings, and regulatory approvals required for asset transfer.
Liquidation Costs and Fee Structure
The 2026 amendments introduce greater transparency and control over liquidation costs, which have been a persistent concern for creditors:
Revised Fee Structure for Liquidators
| Realisation Slab | Fee Percentage | Example (₹50 crore realisation) |
|---|---|---|
| First ₹1 crore | 5% | ₹5 lakh |
| Next ₹9 crore (₹1 to ₹10 crore) | 3.75% | ₹33.75 lakh |
| Next ₹40 crore (₹10 to ₹50 crore) | 2.5% | ₹1 crore |
| Total for ₹50 crore | Blended rate: ~2.78% | ₹1,38.75 lakh |
Liquidation Cost Controls
- Service provider fees: Subject to the new IBBI service provider regulations (competitive quotes, SCC review, reasonableness check)
- Litigation costs: Legal expenses for pursuing avoidance transactions or defending claims must be pre-approved by the SCC. The liquidator cannot incur legal costs exceeding ₹10 lakh per case without SCC consultation
- Running business costs: If the liquidator continues business operations, monthly operating expenses must not exceed 80% of monthly revenue. The NCLT can direct cessation of operations if costs consistently exceed revenue
- Administrative costs: Office rent, staff salaries, communication expenses, and travel costs are capped at 2% of liquidation estate value per annum
- Insurance: The liquidator must maintain professional indemnity insurance of at least ₹50 lakh throughout the liquidation period
Cost Reporting Requirements
Every quarterly progress report must include a detailed cost statement showing:
- Total liquidation costs incurred to date, categorised by type (liquidator fee, legal, valuation, running business, administrative)
- Costs as a percentage of estimated realisation
- Comparison with industry benchmarks published by IBBI
- Projected costs for the remaining liquidation period
- Any cost overruns exceeding approved estimates, with justification
Going Concern Sale: Implementation Challenges
The mandatory going concern sale attempt is the most ambitious element of the 2026 amendments. While conceptually sound, it faces significant practical challenges:
Challenges in Going Concern Sale
| Challenge | Description | Proposed Solution |
|---|---|---|
| Business deterioration | By the time liquidation is ordered, the business has often lost customers, key employees, and operational capability | Early assessment within 30 days; invest in stabilisation if viable |
| Regulatory approvals | Transfer of licenses (FSSAI, drug license, pollution control) to the buyer requires separate regulatory approvals that take months | Initiate regulatory applications simultaneously with bidding process |
| Employee retention | Key employees leave when liquidation is ordered, reducing going concern value | Retention incentives approved by NCLT; employee communication plan |
| Working capital | Banks freeze accounts; suppliers demand advance payment; no working capital available | NCLT-approved interim funding from CoC or potential buyers |
| Customer confidence | Customers switch to competitors; contracts have change-of-control clauses | Customer communication through SCC; escrow arrangements for ongoing orders |
| Buyer identification | Limited pool of buyers for distressed businesses in niche industries | Cross-border marketing; sector-specific investor outreach |
Best Practices for Going Concern Sale
- Day 1 business plan: The liquidator should prepare a business continuation plan within 15 days of liquidation order, identifying essential operations, key employees, critical vendor relationships, and immediate cash flow requirements
- Information memorandum: Prepare a comprehensive information memorandum for potential buyers covering business overview, financial performance, asset inventory, employee details, customer contracts, and regulatory licenses
- Virtual data room: Set up a secure virtual data room for potential buyers to conduct due diligence without disrupting ongoing operations
- Staged bidding process: Use a 2-stage bidding process with initial EOI filtering followed by final binding bids from shortlisted candidates
Claim Admission Process Under 2026 Amendments
The claim admission process is streamlined with clearer timelines and dispute resolution mechanisms:
Revised Claim Filing Timeline
| Activity | Timeline | Responsible Party |
|---|---|---|
| Public announcement for claims | Within 5 days of liquidation order | Liquidator |
| Claim filing deadline (initial) | 30 days from public announcement | All creditors |
| Late claim filing | Up to 90 days (with 10% reduction in ranking) | Late-filing creditors |
| Claim verification and admission/rejection | Within 30 days of filing deadline | Liquidator |
| Communication to claimant | Within 7 days of admission/rejection | Liquidator |
| Challenge to NCLT | Within 14 days of rejection communication | Rejected claimant |
| NCLT decision on challenge | Within 30 days of challenge filing | NCLT |
Claim Categories Under Section 53
- Category 1: CIRP costs and liquidation costs (insolvency resolution process expenses, liquidator fees, legal costs)
- Category 2: Workmen's dues for 24 months preceding liquidation + secured creditors (pari passu)
- Category 3: Employee wages (other than workmen) for 12 months preceding liquidation
- Category 4: Financial debts owed to unsecured creditors
- Category 5: Government dues (taxes, cess, statutory levies)
- Category 6: Remaining debts and dues
- Category 7: Preference shareholders
- Category 8: Equity shareholders
Comparison: India vs Global Liquidation Frameworks
| Aspect | India (2026) | United Kingdom | United States | Singapore |
|---|---|---|---|---|
| Liquidation timeline | 1 year (+ 90 days extension) | No statutory deadline (average 2 to 3 years) | No deadline (Chapter 7, average 1 to 2 years) | No deadline (Companies Act) |
| Creditor oversight | SCC with advisory role | Creditors' committee with binding resolutions | Creditors' committee with strong oversight | Limited creditor role |
| Going concern priority | Mandatory first attempt | Encouraged but not mandatory | Not prioritised in Chapter 7 | Not mandatory |
| Asset sale method | E-auction mandatory | Private treaty or auction | Section 363 sale (court-approved) | Private treaty or auction |
| Liquidator fees | Statutory slab structure | Time-based (approved by creditors) | Court-approved (reasonable compensation) | Committee-approved |
| Progress reporting | Quarterly to NCLT, IBBI, SCC | Annual to creditors and Insolvency Service | As required by US Trustee | Annual to creditors |
India's 1-year mandatory timeline is the most aggressive liquidation deadline globally. While this reflects the government's commitment to reducing judicial backlog, it may prove challenging for complex cases involving multiple assets, litigation, and regulatory approvals.
Practical Checklist for Stakeholders
For Financial Creditors
- File claims within 30 days: Submit claims with complete documentation (loan agreements, security documents, payment records) to avoid the 10% ranking reduction for late filing
- Nominate SCC representative: Actively participate in the SCC by nominating a knowledgeable representative who understands the debtor's business and asset composition
- Review going concern proposals: Evaluate going concern sale proposals carefully as they typically yield 2 to 3 times higher recovery than piecemeal liquidation
- Monitor liquidation costs: Review quarterly cost statements and flag any expenses that appear disproportionate or unnecessary
- Exercise security rights: Secured creditors can choose to realise their security interest outside the liquidation process under Section 52. Evaluate whether independent realisation yields better recovery than participating in collective liquidation
For Operational Creditors
- File verified claims: Submit claims with invoices, delivery proof, and acknowledgement of debt. Disputed operational creditor claims are the most commonly rejected category
- Elect SCC representative: Coordinate with other operational creditors to elect a representative who can effectively communicate collective concerns during SCC meetings
- Evaluate ongoing supply: If the liquidator continues business operations, negotiate favourable terms for any continued supply (advance payment, shorter credit period, priority payment clause)
- Track distribution timeline: Monitor the liquidation timeline to ensure distribution happens within the 1-year deadline. Delayed distribution affects working capital for small operational creditors
For Potential Asset Buyers
- Register on e-auction platforms: Pre-register on IBBI-approved e-auction platforms (MSTC, bank platforms) to receive notifications about upcoming asset sales
- Conduct early due diligence: Request access to the virtual data room during the EOI stage. Early due diligence allows competitive bidding and identifies deal-breakers before committing resources
- Evaluate regulatory requirements: Identify all regulatory approvals required for asset or business transfer (competition law, sector-specific licenses, land use permissions) and factor the timeline into your bid
- Structure going concern bids: Going concern bids should address employee retention, customer continuity, vendor relationships, and regulatory compliance. The NCLT evaluates bids holistically, not just on price
- EMD and payment readiness: Arrange 10% EMD and demonstrate financial capacity for the 25% first payment within 30 days. Auction winners who fail to pay forfeit their EMD and face debarment from future auctions
How IncorpX Supports Liquidation Proceedings
IncorpX provides comprehensive advisory services for all stakeholders in liquidation proceedings:
- Liquidator advisory: Supporting liquidators with asset inventory, valuation coordination, sale marketing, and compliance with amended IBBI regulations
- Creditor representation: Representing financial and operational creditors in claim filing, SCC meetings, and NCLT applications
- Asset purchase advisory: Assisting potential buyers in evaluating going concern purchase opportunities, conducting due diligence, and structuring acquisition bids
- Avoidance transaction analysis: Forensic analysis of preferential transactions, undervalued transactions, and fraudulent trading to maximise estate recovery
- Distribution dispute resolution: Handling disputes regarding claim ranking, distribution amounts, and Section 53 waterfall application
- NCLT representation: Filing and arguing applications before NCLT for claim disputes, sale approvals, and timeline extensions
Contact IncorpX for expert liquidation advisory and creditor representation services.
Frequently Asked Questions
What are the key IBBI liquidation amendments in 2026?
The 2026 amendments introduce enhanced CoC oversight in liquidation proceedings, mandatory stakeholder consultation mechanisms, revised asset sale procedures, stricter timelines for liquidation completion, and new reporting requirements for liquidators to IBBI and the NCLT.
How does the CoC's role change in liquidation?
The CoC now has advisory oversight in liquidation proceedings. Previously, the CoC's role ended once NCLT ordered liquidation. The 2026 amendment allows the CoC to advise on asset sale strategy, approve major liquidation decisions, and receive regular progress reports from the liquidator.
What is the new liquidation timeline?
The amended regulations prescribe a strict 1-year timeline for completing liquidation from the date of NCLT order, extendable by 90 days with NCLT approval. Previously, liquidation proceedings dragged on for 3 to 5 years without any statutory deadline.
How have asset sale procedures changed?
Asset sale procedures now require transparent auction mechanisms through an e-auction platform, minimum reserve price determination by a registered valuer, wider publicity through national and regional media, and mandatory disclosure of all bids received to the CoC and NCLT.
Can the CoC reject a liquidator's asset sale proposal?
The CoC can advise against a specific asset sale proposal, but the liquidator retains the final decision-making authority. If the CoC disagrees with the liquidator's decision, it can raise the matter with the NCLT for adjudication.
What happens to ongoing contracts during liquidation?
The 2026 amendment clarifies that the liquidator can disclaim onerous contracts within 30 days of liquidation order. Contracts that are beneficial to the liquidation estate can be continued or assigned to the asset purchaser. Counterparties to disclaimed contracts can file claims for breach.
What are the new reporting requirements for liquidators?
Liquidators must file quarterly progress reports with NCLT and IBBI detailing asset inventory, sale activities, claim admission status, distribution plan, legal proceedings, and expenses incurred. These reports are available to all stakeholders through the IBBI portal.
How does the amendment affect operational creditors?
Operational creditors gain enhanced participation rights in the liquidation stakeholder consultation committee. They can now attend consultation meetings, submit proposals for asset sale strategy, and receive copies of all progress reports filed by the liquidator.
What is the stakeholder consultation committee?
The stakeholder consultation committee replaces the informal creditor coordination mechanism in liquidation. It includes representatives of financial creditors, operational creditors, workmen, and the corporate debtor's promoters. The committee meets at least once a quarter to review liquidation progress.
Can assets be sold as a going concern in liquidation?
Yes, the 2026 amendment explicitly prioritises sale as a going concern over piecemeal asset sale. The liquidator must first attempt to sell the business as a going concern (within the first 6 months). Piecemeal sale is permitted only if going concern sale fails or is not feasible.
What is the revised distribution waterfall?
The distribution waterfall under Section 53 of the IBC remains unchanged in the 2026 amendment. However, the amendment adds clarity on treatment of interest accrued during liquidation, proceeds from avoidance transaction recovery, and distribution of surplus after all creditors are paid.
How are avoidance transaction proceeds distributed?
Proceeds from avoidance transaction recovery (Sections 43 to 51) are distributed as part of the liquidation estate under Section 53. The amendment clarifies that recovery costs (legal fees, forensic audit fees) are deducted first, and the net proceeds are added to the estate for distribution.
What is the maximum fee for liquidators under the new rules?
Liquidator fees are capped at a percentage of the realisation amount: 5% of the first ₹1 crore, 3.75% of the next ₹9 crore, 2.5% of the next ₹40 crore, 1% of the next ₹50 crore, and 0.25% of amounts above ₹100 crore. Minimum fee is ₹1 lakh.
What happens if liquidation is not completed within 1 year?
If liquidation is not completed within 1 year, the liquidator must file an application with NCLT seeking extension. The NCLT can grant a maximum 90-day extension. If liquidation is still not complete, IBBI may replace the liquidator or direct specific completion actions.
Can a company be dissolved during liquidation?
Yes, after all assets are realised and distributed, the liquidator applies to NCLT for dissolution of the company under Section 54. The NCLT's dissolution order is filed with the ROC, and the company ceases to exist. The corporate debtor's CIN is struck off from MCA records.
How does the amendment treat workmen's dues?
Workmen's dues continue to receive priority under Section 53(1)(b) of the IBC. The 2026 amendment adds that workmen must be paid within 30 days of asset realisation, and the liquidator cannot delay workmen's payment pending resolution of other creditor claims.
What is the role of NCLT in the amended liquidation process?
NCLT's role is enhanced to include active monitoring of liquidation progress through quarterly report review, settlement of disputes between the liquidator and stakeholder consultation committee, approval of asset sale above specified thresholds, and enforcement of the 1-year timeline.
Can the liquidator run the business during liquidation?
The liquidator can run the business for a maximum period of 2 years from the liquidation order under Section 35(1)(e), subject to NCLT approval. The 2026 amendment requires the liquidator to demonstrate that continuing business operations enhances going concern sale value.
What happens to pending litigation during liquidation?
The liquidator reviews all pending litigation and decides whether to continue or withdraw each case. Litigation that is unlikely to result in recovery or is cost-prohibitive to pursue should be withdrawn. The decision must be reported to the stakeholder consultation committee.
How does the amendment affect cross-border liquidation?
The 2026 amendment does not specifically address cross-border liquidation but requires liquidators to identify and pursue recovery of foreign assets. The liquidator must report all known foreign assets to NCLT and seek orders for international cooperation where necessary.
Can creditors challenge the liquidator's decisions?
Yes, any creditor can file an application before NCLT challenging the liquidator's decisions regarding claim admission, asset sale, distribution, or any other matter. The NCLT reviews the challenge on merits and can confirm, modify, or set aside the liquidator's decision.
Nebin Binoy 
