Liquidation rules amended to abolish sale as going concern

‘The Insolvency and Bankruptcy Board of India (IBBI) — in its latest amendments to IBC regulations — has done away with the provision of allowing sale of a company as a going concern under the liquidation process.

- RUCHIKA CHITRAVANSHI

‘The going concern concept is a fundamental accounting principle that assumes a business will continue operating in the foreseeable future (at least the next 12 months) without needing to liquidate or significantly scale back operations.

‘The changes in the liquidation process second amendment, omitting the said provision, were made by the IBBI in a notification dated October 14.

‘The insolvency regulator, in an earlier discussion paper, had raised several concerns regarding the sale of a company as a going concern under the liquidation process. It included poor out-

Experts said that with the removal of the possibility of sale of the company or business as a going concern, the only option left for bidders to acquire the company is through the corporate insolvency resolution process (CIRP). This is because under liquidation, only assets can be sold in one or the other manner.