The Insolvency and the Bankruptcy Board of India (IBBI) has come out with a detailed document titled “Avoidance Transactions – Red Flags”. Avoidance transactions are those transactions by which properties are transferred before the commencement of the insolvency proceedings. Such transactions should be avoided as it affects the basic purpose of maximising the value of assets of the corporate debtors and its equitable distribution among the creditors.
Some of the red flags pointed out by IBBI are as follows:
Further, it is also mandatory on the part of the insolvency resolution professional to file an application with the adjudicating authorities (i.e. NCLT etc.) seeking return of the value lost in avoidance transactions.
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