The insolvency regulator, Insolvency and Bankruptcy Board of India (IBBI), proposes to ban the appointment of commission agents for the sale of assets in a liquidation process. It is of the view that the appointment of commission agents is an additional burden on the liquidation estate, in addition to the overlapping of work with the liquidator and, should, therefore, must be avoided.
With the evolution of the market, there are many alternative methods to tap a larger pool of potential bidders rather than relying on such commission agents, said the IBBI in a discussion paper on strengthening the regulatory framework of the liquidation process. The IBBI highlighted that one option could be to use the services offered under the platform for distressed assets (PDA) besides many online platforms to list assets for sale for free or for a negligible amount.
Greater visibility Such means may be explored to extend the reach to stakeholders, maximise the value of distressed assets and ensure transparency, said the IBBI. Also, the board is contemplating providing the facility to liquidators to upload auction notices on its website, which would allow greater visibility for the assets being sold and curtail the information asymmetry in the process.
Commenting on the IBBI proposal to ban the appointment of marketing agents on a commission/ success-fee basis for the sale of assets, Ruby Singh Ahuja, Senior Partner, Karanjawala & Co, said the board rightly proposes to do away with this since such a structure imposes an additional burden on the liquidation estate, coupled with the duplicity of work.
"It is clear that going forward the board not only wants to make the sale of assets a more transparent process but also has recommended full involvement of the stakeholders for all significant matters relating to the liquidation process, including the manner to be adopted for sale of assets," she said.
Ahuja also said that the proposal is the need of the hour since it has been observed in some cases that stakeholders have not been kept in the loop by the liquidator, which results in the abuse of the process.
"Greater involvement of the stakeholder committee in the complete process, beginning from the appointment of the professional and leading to the sale of assets, is essential to keep checks and balances in place," she added.
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