IBBI Proposes Changes To CIRP Regulations, Invites Public Comments Till 22nd November 2023

The Insolvency and Bankruptcy Board of India (“IBBI”) on 01.11.2023 has published a Discussion Paper on amendments to IBBI (Insolvency Resolution Process for Corporate Process) Regulations, 2016 (“CIRP Regulations”). The IBBI has also invited comments from the public/stakeholders regarding proposed changes to the CIRP Regulations. The comments can be submitted online at www.ibbi.gov.in till 22.11.2023. PROPOSED CHANGES Approval of Committee of Creditors (CoC) for insolvency resolution process cost: The Insolvency Professional (IP) should seek approval of all components of the insolvency resolution process cost, including the expenditure incurred for ongoing operations of the CD.Monthly CoC meetings: To review the work/progress of the CIRP by CoC, RP be mandated to conduct the meetings of CoC every month.Discussion of valuation methodology and report with CoC: Before finalisation of valuation report, valuers shall explain the valuation methodology to the members of the committee in a meeting facilitated by the RP.Disclosure of fair value in the Information Memorandum: Given the advantages associated with the disclosure of fair value with resolution applicant, it is proposed that fair value should be made part of Information Memorandum.Continuation of process activities pending disposal of extension application by the Adjudicating Authority (AA): In order to bring clarity on the continuation of the process when the application filed with the AA is pending for the extension orders and to enable the RP to fulfil his responsibilities, an amendment to regulation 40 of the CIRP Regulations is proposed.Clarity in minimum entitlement to dissenting financial creditors: To provide clarity with regard to entitlement of dissenting financial creditors, which shall be lower of the:amount that would have been paid to such creditors, if the amount to be distributed under the resolution plan had been distributed in accordance with the order of priority in sub-section (1) of section 53; or (ii) the liquidation value as defined under these regulations been distributed in accordance with the order of priority in sub-section (1) of section 53. Further, regulation 38(1) may be amended to provide that the financial creditors, who have a right to vote under sub-section (2) of section 21 and did not vote in favour of the resolution plan, shall be paid ‘amount due in the event of liquidation’ in priority over financial creditors who voted in favour of the plan. Mandatory contents of resolution plan: To streamline the resolutions and prevent delay in the implementation of the resolution plan, it is proposed that the resolution plan may be structured in two parts. Part A of the resolution plan shall deal with the inflow i.e., payment under the resolution plan (total value of the resolution plan), payment of insolvency resolution process cost, payment schedule, feasibility and viability of the resolution plan etc. while Part B will deal with distribution to the various stakeholders. Structuring the resolution plan in two parts will enable AA to first approve the resolution plan effectuating control by the resolution applicant so that inflow can take place and CD may start functioning again. In case of any dispute or litigation. The disputed amount may be kept in an escrow account and be distributed after the litigation in respect of distribution attains finality. Public Comments Invited The IBBI has invited comments on the aforementioned proposals and draft amendments to IBBI (Insolvency Resolution Process for Corporate Process) Regulations, 2016. Comments may be submitted electronically by 22nd November 2023 on official website of IBBI at www.ibbi.gov.in Click Here To Read/Download Notice

IBBI Proposes Changes To CIRP Regulations, Invites Public Comments Till 22nd November 2023

Pallavi Mishra

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