Legislation UpdatesRules & Regulations

The IBBI amends the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 and the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016.

The Insolvency and Bankruptcy Board of India (IBBI) notified the:

  • Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) (Amendment) Regulations, 2019 and;
  • the Insolvency and Bankruptcy Board of India (Liquidation Process) (Amendment) Regulations, 2019

2. The salient amendments affected by the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) (Amendment) Regulations, 2019 are:

(a) The amendments specify the process for withdrawal of applications before the constitution of a committee of creditors (CoC), after the constitution of CoC but before the issue of invitation for expression of interest, and after the issue of invitation for expression of interest.

(b) The amendments require that while approving a resolution plan or deciding to liquidate the corporate debtor, the CoC may:

(i) approve a plan providing for contribution for meeting the liquidation costs,

(ii) recommend sale of the corporate debtor or sale of business of the corporate debtor as a going concern, and

(iii) fix, in consultation with the RP, the fee payable to the liquidator,if an order for liquidation is passed by the Adjudicating Authority.

3. The salient amendments affected by the Insolvency and Bankruptcy Board of India (Liquidation Process) (Amendment) Regulations, 2019 are:
(i) The amendments specify the process for (a) sale of the corporate debtor as going concern, and (b) sale of the business of corporate debtor as going concern under liquidation. These also provide that where a corporate debtor is sold as a going concern, the liquidation process shall be closed without dissolution of the corporate debtor.

(ii) The amendments require completion of the liquidation process within one year of its commencement, notwithstanding the pendency of applications for avoidance transactions. These provide a model timeline for each task in the liquidation process. It also specifies a maximum time of 90 days from the order of liquidation for completion of compromise or arrangement, if any, proposed by the stakeholders under Section 230 of the Companies Act, 2013. These will ensure that the liquidation process is closed at the earliest.

(iii) The amendments require the financial creditors, who are financial institutions, to contribute towards the liquidation cost, where the corporate debtor does not have adequate liquid resources to complete liquidation, in proportion to the financial debts owed to them by the corporate debtor, in case the CoC did not approve a plan for such contribution during corporate insolvency resolution process. However, such contribution along with interest at bank rate thereon shall form part of liquidation cost, which is paid in priority.

(iv) The amendments provide for the constitution of a Stakeholders’ Consultation Committee having representation from secured financial creditors, unsecured financial creditors, workmen and employees, government, other operational creditors, and shareholder/partners to advice the liquidator on matters relating to the sale. However, the advice of this committee is not binding on the liquidator.

(v) The amendments require that a stakeholder may submit its claim or update its claim submitted during the corporate insolvency resolution process, as on the liquidation commencement date. Along with the submission of claim, a secured creditor shall inform the liquidator of its decision to relinquish its security interest to liquidation estate or to realise its security interest.

(b) The amendments require that while approving a resolution plan or deciding to liquidate the corporate debtor, the CoC may:

(i) approve a plan providing for contribution for meeting the liquidation costs,

(ii) recommend sale of the corporate debtor or sale of business of the corporate debtor as a going concern, and

(iii) fix, in consultation with the RP, the fee payable to the liquidator, if an order for liquidation is passed by the Adjudicating Authority.


[Press Release dt. 25-07-2019]

Insolvency and Bankruptcy Board of India

Amendments to existing lawsLegislation Updates

The Insolvency and Bankruptcy Board of India (IBBI) has notified on 04-07-2018, the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) (Third Amendment) Regulations, 2018.

The following are salient amendments to the regulations:

a. The regulations provide that wherever the corporate debtor has classes of creditors having at least ten creditors in the class, the interim resolution professional shall offer a choice of three insolvency professionals in the public announcement to act as the authorised representative of creditors in each class. A creditor in a class may indicate its choice of an insolvency professional, from amongst the three choices provided by the interim resolution professional, to act as its authorised representative. The insolvency professional, who is the choice of the highest number of creditors in the class, shall be appointed as the authorised representative of the creditors of the respective class.

b. An application for withdrawal of an application admitted under Section 7, 9 or 10 of the Code (for closure of corporate insolvency resolution process) may be submitted to the interim resolution professional or the resolution professional, as the case may be, before issue of invitation for expression of interest, along with a bank guarantee towards estimated cost incurred for certain purposes under the process. The committee of creditors (CoC) shall consider the application within seven days of its constitution or seven days of receipt of the application, whichever is later. If the application is approved by the CoC with 90% voting share, the resolution professional shall submit the application to the Adjudicating Authority on behalf of the applicant, within three days of such approval.

c. Where rate of interest has not been agreed to between the parties in case of creditors in a class, the voting share of such a creditor shall be in proportion to the financial debt that includes an interest at the rate of eight per cent p.a.

d. Where the appointment of resolution professional is delayed, the interim resolution professional shall perform the functions of the resolution professional from the fortieth day of the insolvency commencement date till a resolution professional is appointed.

e. A meeting of the CoC shall be called by giving not less than five days’ notice in writing to every participant. The CoC may, however, reduce the notice period from five days to such other period of not less than forty-eight hours where there is any authorised representative and to twenty-four hours in all other cases. The authorised representative shall circulate the agenda to creditors in a class and announce the voting window at least twenty-four hours before the window opens for voting instructions and keep the voting window open for at least twelve hours.

f. The resolution professional shall form an opinion whether the corporate debtor has been subjected to certain transactions (preferential transactions, undervalued transactions, extortionate transactions or fraudulent transactions) by 75th day and make a determination of the same by 115th day of the insolvency commencement date.  Where the resolution profesional makes such a determination,  he shall apply to the Adjudicating Authority for appropriate relief before 135th day of the insolvency commencement date.

g. The resolution professional shall publish an invitation for expression of interest (EoI) by the 75th day from the insolvency commencement date. The invitation shall specify the criteria, ineligibility, the last date for submission of EoI and other details and shall not require payment of non-refundable deposit. Any EoI received after the specified time shall be rejected. The resolution professional shall conduct due diligence based on material on record and issue a provisional list of prospective resolution applicants within 10 days of the last date of submission of EoI. On considering objections to the provisional list, the resolution professional shall issue the final list of prospective resolution applicants, within 10 days of the last date for receipt of objections.

h. The resolution professional shall issue the information memorandum, the evaluation matrix and the request for resolution plans (RFRP), within 5 days of issue of the provisional list to the prospective resolution applicants and allow at least 30 days for submission of resolution plans. The RFRP shall detail each step in the process, and the manner and purposes of interaction between the resolution professional and the prospective resolution applicant, along with corresponding timelines. The resolution plan needs to demonstrate that (a) it addresses the cause of default; (b) it is feasible and viable; (c) it has provisions for its effective implementation; (d) it has provisions for approvals required and the timeline for the same; and (e) the resolution applicant has the capability to implement the resolution plan. The CoC shall evaluate the resolution plan strictly as per the evaluation matrix to identify the best resolution plan and may approve it with the required majority. If approved by the CoC, the resolution professional shall endeavour to submit the resolution plan approved by the CoC to the Adjudicating Authority at least fifteen days before the maximum period for completion of corporate insolvency resolution process, along with a compliance certificate in the specified Form.

The regulations provide for a model timeline of the corporate insolvency resolution process assuming that the interim resolution professional is appointed on the date of commencement of the process and the time available is 180 days, as under:

Section / Regulation Description of Activity Norm Timeline
Section 16(1) Commencement of CIRP and appointment of IRP …. T
Regulation 6(1) Public announcement inviting claims Within 3 Days of Appointment of IRP T+3
Section 15(1)(c) / Regulations 6(2)(c) and 12 (1) Submission of claims For 14 Days from Appointment of IRP T+14
Regulation 12(2) Submission of claims Up to 90th day of commencement T+90
Regulation 13(1) Verification of claims received under regulation 12(1) Within 7 days from the receipt of the claim T+21
Regulation 13(2) Verification of claims received under regulation 12(2) T+97
Section 21(6A) (b) / Regulation 16A Application for appointment of AR Within 2 days from verification of claims received under regulation 12(1) T+23
Regulation 17(1) Report certifying constitution of CoC T+23
Section 22(1) / Regulation 19(1) 1st meeting of the CoC

 

Within 7 days of the constitution of the CoC, but with seven days’ notice T+30
Section 22(2) Resolution to appoint RP by the CoC In the first meeting of the CoC T+30
Section 16(5) Appointment of RP On approval by the AA ……
Regulation 17(3) IRP performs the functions of RP till the RP is appointed. If RP is not appointed by 40th day of commencement T+40
Regulation 27 Appointment of valuer Within 7 days of appointment of RP, but not later than 40th day of commencement    T+47
Section 12(A) / Regulation 30A Submission of application for withdrawal of application admitted Before issue of EoI W
CoC to dispose of the application Within 7 days of its receipt or 7 days of constitution of CoC, whichever is later. W+7
Filing application of withdrawal, if approved by CoC with 90% majority voting, by RP to AA Within 3 days of approval by CoC W+10
Regulation 35A RP to form an opinion on preferential and other transactions Within 75 days of the commencement T+75
RP to make a determination on preferential and other transactions Within 115 days of commencement T+115
RP to file applications to AA for appropriate relief Within 135 days of commencement T+135
Regulation 36 (1) Submission of IM to CoC Within 2 weeks of appointment of RP, but not later than 54th day of commencement T+54
Regulation 36A Publish Form G Within 75 days of commencement T+75
Invitation of EoI
Submission of EoI At least 15 days from issue of EoI (Assume 15 days)   T+90
Provisional List of RAs by RP Within 10 days from the last day of receipt of EoI T+100
Submission of objections to provisional list For 5 days from the date of provisional list T+105
Final List of RAs by RP Within 10 days of the receipt of objections T+115
Regulation 36B Issue of RFRP, including Evaluation Matrix and IM Within 5 days of the issue of the provisional list T+105
Receipt of Resolution Plans At least 30 days from issue of RFRP (Assume 30 days) T+135
Regulation 39(4) Submission of CoC approved Resolution Plan to AA As soon as approved by the CoC T+165
Section 31(1) Approval of resolution plan by AA T=180

Note: AAAdjudicating Authority; ARAuthorised Representative; CIRPCorporate Insolvency Resolution Process; CoCCommittee of Creditors; EoIExpression of Interest; IMInformation Memorandum; IRPInterim Resolution Professional; RAResolution Applicant; RPResolution Professional; RFRPRequest for Resolution Plan.

Ministry of Corporate Affairs

Business NewsNews

With an objective to familiarise the eligible and desirous individuals and entities with the process of registration as a valuer with the Insolvency and Bankruptcy Board (IBBI) , the IBBI today released the process required. The process of registration as registered valuer with the IBBI is as under:

A. For Individuals

Step 1: Satisfy yourself that you meet the eligibility requirements prescribed in Rule 3 and qualification and experience prescribed in Rule 4 of the Rules.

Step 2: Thereafter, seek enrolment as a valuer member of a RVO recognized by the IBBI.

Step 3: As a member of a RVO, complete the educational course recognised by the IBBI.

Step 4: Register and pass the computer based Valuation Examination of the relevant Asset Class conducted by the IBBI. Details of the Valuation Examination are available at IBBI website (www.ibbi.gov.in).

Step 5Within three years of passing the valuation examination, submit Form A appended to the Rules, duly filled in along with a payment of Rs. 5900 (Fee of Rs.5000 + 18% GST) in favour of the Insolvency and Bankruptcy Board of India and supporting documents, to your RVO. Quote GST number, if required by you. The Form A is to be submitted, documents to be uploaded and payment is to be made online. Please visit the IBBI web site www.ibbi.gov.in for this purpose.

Step 6: Thereafter, RVO shall verify Form A and other requirements and then submit the Form A along with its recommendation for registration as a valuer to the IBBI. The Form is to be submitted by the RVO online.

Step 7: On receipt of Form A along with recommendation of the RVO, the fee and other documents, the IBBI shall process the application for registration in accordance with the Rules.

B. For Entities (Partnership Firms, LLP and Companies)

Step 1: Satisfy yourself that you meet the eligibility requirements prescribed in rule 3 and qualification and experience prescribed in Rule 4 of the Rules.

Step 2: Submit Form B appended to the Rules, duly filled in along with a payment of Rs.11,800 (Fee of Rs.10,000 + 18% GST) in favour of the Insolvency and Bankruptcy Board of India and supporting documents, to your RVO. Quote GST number, if required by you. The Form B is to be submitted, documents to be uploaded and payment is to be made online. Please visit the IBBI web site www.ibbi.gov.in for this purpose.

Step 3: Thereafter, RVO shall verify Form B and other requirements and then submit the Form B along with its recommendation for registration as a valuer to the IBBI. The Form is to be submitted by the RVO online.

Step 4: On receipt of Form B along with recommendation of the RVO, the fee and other documents, the IBBI shall process the application for registration in accordance with the Rules.

BACKGROUND

Earlier, the Central Government had notified the commencement of Section 247 (relating to valuers) of the Companies Act, 2013 with effect from 18th October, 2017 and also notified the Companies (Registered Valuers and Valuation) Rules, 2017 (hereafter, “Rules”) on the same day. Vide notification dated 23rd October, 2017, the Central Government issued the Companies (Removal of Difficulties) Second Order, 2017 to provide that valuations required under the Companies Act, 2013 shall be undertaken by a person who, having the necessary qualifications and experience, and being a valuer member of a recognised valuer organisation (RVO), is registered as a valuer with the Authority. Vide another notification on the same date, the Central Government delegated its powers and functions under Section 247 of the Companies Act, 2013 to the Insolvency and Bankruptcy Board of India (IBBI) and specified the IBBI as the Authority under the Rules.

Subject to meeting other requirements, an individual is eligible to be a registered valuer, if he (i) is a fit and proper person, (ii) has the necessary qualification and experience, (iii) is a valuer member of a RVO, (iv) has completed a recognised educational course as member of a RVO, and (v) has passed the valuation examination conducted by the IBBI, and (vi) is recommended by the RVO for registration as a valuer. A partnership entity or a company is also eligible for registration subject to meeting the requirements.

Ministry of Corporate Affairs

Business NewsNews

The Insolvency and Bankruptcy Board of India (IBBI) has signed a Memorandum of Understanding (MoU) with Reserve Bank of India (RBI) on the side-lines of the 4th meeting of the  Insolvency Law Committee (ILC) at New Delhi.

The Insolvency and Bankruptcy Code, 2016 (Code) provides for reorganisation and insolvency resolution of corporate persons, partnership firms and individuals in a time bound manner for maximization of the value of assets of such persons, to promote entrepreneurship, availability of credit and balance the interests of all the stakeholders and, for this purpose, has established an institutional infrastructure comprising of Adjudicating Authorities, the IBBI, insolvency professionals, insolvency professional agencies and information utilities. The IBBI exercises regulatory oversight over the Insolvency Professionals, Insolvency Professional Agencies and Information Utilities. It writes and enforces rules for processes, namely, corporate insolvency resolution, corporate liquidation, individual insolvency resolution and individual bankruptcy under the Code.

Both the RBI and the IBBI are interested in the effective implementation of the Code and its allied rules and regulations, through a quick and efficient resolution process. Therefore, they have agreed under the MoU to assist and co-operate with each other for the effective implementation of the Code, subject to limitations imposed by the applicable laws.

The MoU provides for:

(a) sharing of information between the two parties, subject to the limitations imposed by the applicable laws;

(b) sharing of resources available with each other to the extent feasible and legally permissible;

(c) periodic meetings to discuss matters of mutual interest, including regulatory requirements that impact each party’s responsibilities, enforcement cases, research and data analysis, information technology and data sharing, or any other matter that the parties believe would be of interest to each other in fulfilling their respective statutory obligations;

(d) cross-training of staff in order to enhance each party’s understanding of the other’s mission for effective utilisation of collective resources; (e) capacity building of insolvency professionals and financial creditors;

(f) joint efforts towards enhancing the level of awareness among financial creditors about the importance and necessity of swift insolvency resolution process of various types of borrowers in distress under the provisions of the Code, etc.

Ministry of Corporate Affairs

Legislation UpdatesRules & Regulations

The Insolvency and Bankruptcy Code, 2016 (Code) is a modern economic legislation. Section 240 of the Code empowers the Insolvency and Bankruptcy Board of India (IBBI) to make regulations subject to the conditions that the regulations: (a) carry out the provisions of the Code, (b) are consistent with the Code and the rules made thereunder; (c) are made by a notification published in the official gazette; and (d) are laid, as soon as possible, before each House of Parliament for 30 days.

The IBBI has evolved a transparent and consultative process to make regulations. It has been endeavour of the IBBI to effectively engage stakeholders in the regulation making process. The process generally starts with a working group making draft regulations. The IBBI puts these draft regulations out in public domain seeking comments thereon. It holds a few round tables to discuss draft regulations with the stakeholders. It takes advice of its Advisory Committee. The process culminates with the Governing Board of the IBBI finalising regulations and the IBBI notifies them. This process endeavours to factor in ground reality, secures ownership of regulations, imparts democratic legitimacy and makes regulations robust and precise, relevant to the time and for the purpose.

Public consultation enables collective choice and hence plays an important role in evolution of regulatory framework. The participation of the public, particularly the stakeholders and the regulated, in the regulatory process ensures that the regulations are informed by the legitimate needs of those interested in and affected by regulations.

Given the importance of subordinate legislations for the processes under the Code, it is essential that the IBBI has a structured, robust mechanism, which includes effective engagement with the stakeholders, for making regulations. In fact, Section 196(1)(s) of the Code requires the IBBI to specify mechanisms for issuing regulations, including the conduct of public consultation processes, before notification of regulations.

In sync with this philosophy and the statutory requirement, the IBBI proposes to make regulations to govern the process of making regulations and consulting the public. The IBBI invites comments from public, including the stakeholders and the regulated, on the draft Insolvency and Bankruptcy Board of India (Mechanism for Issuing Regulations), Regulations, 2018 which is annexed to this press release and also available at www.ibbi.gov.in. A cost benefit analysis of the draft regulations is appended at the end of the draft regulations. The comments may be e-mailed at feedback@ibbi.gov.in by 31st March, 2018, with subject line “Mechanism for Issuing Regulations”.

Ministry of Corporate Affairs