RECENT AMENDMENTS TO ‘IBBI (INSOLVENCY RESOLUTION PROCESS FOR CORPORATE PERSONS) REGULATIONS, 2023’

[Mr. M. GOVINDARAJAN]

The Insolvency and Bankruptcy Board of India, on 18.09.2023, made the amendments to Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) (Second Amendment) Regulations, 2023, vide Notification No. IBBI/2023-24/GN/REG 106, dated 18.09.2023.  Major changes in the process of corporate insolvency resolution process have been brought through this amendment.

Details of debt etc in application for CIRP

The amendment inserted a new Regulation 2D, which requires the financial creditor or operational creditor while filing application for initiation of corporate insolvency resolution process the creditor shall also submit along with evidence, chronology of the debt and default including the date when the debt became due, date of default, dates of part payments, if any, date of last acknowledgment of debt and the limitation applicable.

Assistant and Co-operation to Resolution Professional

The amendment inserted a new Regulation 3A which requires the personnel of the corporate debtor shall assist and render co-operation to Interim Resolution Professional/Resolution Professional.  During the CIRP the IRP/RP  shall take custody and control as specified under this regulation from the personnel of the corporate debtor, its promoters or any other person associated with the management of the corporate debtor as the case may be, of the following:-

• the records of information relating to the assets, finances and operations of the corporate debtor referred in clause (a) of section 18 and such other information required under regulation 36;
• the assets recorded in the balance sheet of the corporate debtor or in any other records referred in clause (f) of section 18.

The personnel of corporate debtor shall provide to the IRP/RP, a list of assets and records while handing over their custody and control, and the interim resolution professional or resolution professional may, after taking such custody and control, if deemed necessary, identify person(s) in whose possession these assets and records will be held.

Where any asset or record has not been handed over or the list has not been provided  the IRP/RP  shall himself prepare a list of assets and records while taking custody and control of assets and records, and IRP/RP may, after taking such custody and control, if deemed necessary, identify person(s) in whose possession these assets and records will be held.  Each list of assets and records shall be signed by the parties present and by at least two individuals who have witnessed the act of taking control and custody of such assets and records.

The IRP/RP, shall requisition from the personnel of the corporate debtor, its promoters or any other person associated with the management of the corporate debtor-

• the information relating to the assets, finances and operations of the corporate debtor referred in clause (a) of section 18 and such information required under regulation 36 which were required to be maintained by the corporate debtor but have not yet been handed over.
• the assets which are recorded in the balance sheet or in any other records referred in clause (f) of section 18 and whose custody has not been handed over.

In case of non furnishing of information the IRP/RP shall, in the application to be filed before the Adjudicating Authority directing to produce information/document, show presence of such asset or record in the notice of requisition and absence of such asset or record in the list of assets and records taken in control and custody.

Submission of proof of claims

The amendment substituted a new regulation for Regulation 12(1).  The newly substituted Regulation 12(1) provides that a creditor shall submit claim with proof on or before the last date mentioned in the public announcement.

A creditor, who fails to submit claim with proof within the time stipulated in the public announcement, may submit his claim with proof to the interim resolution professional or the resolution professional, as the case may be, up to the date of issue of request for resolution plans under regulation 36B or ninety days from the insolvency commencement date, whichever is later.  The creditor shall provide reasons for delay in submitting the claim beyond the period of 90 days from the insolvency commencement date. 

The amendment omitted Regulation 12(2).

Claim verification

Regulation 13 provides the procedure for verification of claims.  The amendment inserted new sub regulations 13(1A), 13(1B) and 13(1C) after 13(1). 

The newly inserted Regulation 13(1A) provides that where the IRP/RP, does not collate the claim after verification, he shall provide reasons for the same.

The newly inserted Regulation 13(1B) provides that in the event that claims are received after the period specified under sub-regulation (1) of regulation 12 and up to 7 days before the date of meeting of creditors for voting on the resolution plan or the initiation of liquidation, the IRP/RP shall verify all such claims and categorize them as acceptable or non-acceptable for collation.

The newly inserted Regulation 13(1C) provides that the IRP/RP shall-

• intimate the creditor within 7 days of categorization thereof under sub-regulation (1B) and provide reasons where such claim has been categorized as non-acceptable for collation; and
•  put up the claims categorized as acceptable under sub-regulation (1B) and collated by him to-

• the committee in its next meeting for its recommendation for inclusion in the list of creditors and its treatment in the resolution plan, if any; and
• submit such claims before the Adjudicating Authority for condonation of delay and adjudication wherever applicable.

Authorized representatives

The amendment inserted new sub regulations 16(3A), 16(3B) and 16(3C) after regulation 16(3). 

The newly inserted Regulation 16(3A) provides that the financial creditors in the class, representing not less than 10% voting share may seek replacement of the authorized representative with an insolvency professional of their choice by making a request to the IRP/RP who shall circulate such request to the creditors in that class and announce a voting window open for at least 24 hours.

The newly inserted Regulation 16(3B) provides that the IRP/RP shall offer choice of at least 3 insolvency professionals to the financial creditors in the class including such insolvency professional(s) proposed under sub-regulation (3A) along with the existing authorized representative.

The newly inserted Regulation 16(3C) provides that the RP shall apply to the Adjudicating Authority for appointment of the authorized representative who receives the highest percentage of voting share of financial creditors in that class.

Enhanced fee to Authorized Representative

The amendment substituted a new Regulation for the existing Regulation 13(8).  The newly substituted Regulation 13(8) enhanced the remuneration payable to the Authorized representative.  The authorized representative of creditors in a class shall be entitled to receive fee for every meeting of the committee attended by him-

• 10 - 100 creditors in a class - Fee is Rs.30000/- (previously Rs.15000/-) per meeting of the Committee;
• 101 - 1000 creditors in a class - Fee is Rs.40000/-  (previously Rs.20000/-) per meeting of the Committee;
• More than 1000 creditors in a class - Fee is Rs.50000/- (previously Rs.25000/-) per meeting of the Committee.

The amendment provides that the authorized representative shall be entitled to receive fee for every meeting of the class of creditors convened by him in the following manner,

• 10 - 100 creditors in a class - Fee is Rs.10000/- per meeting of creditors in class with authorized representative;
• 101 - 1000 creditors in a class - Fee is Rs.12000/-  per meeting of creditors in class with authorized representative;
• More than 1000 creditors in a class - Fee is Rs.15000/-  per meeting of creditors in class with authorized representative.

The payment of fee to authorized representative shall be part of insolvency resolution process cost in respect of 2 meetings with the creditors he represents corresponding to a meeting of the committee of creditors.  The fee for any additional meeting beyond 2 meetings corresponding to a meeting of the committee of creditors shall be part of insolvency resolution process cost subject to approval of committee of creditors.

Obligations of authorized representative

The amendment inserted a new sub regulation- 13(10), 13(11) and 13(12).  The newly inserted Regulation 13(10) provides that-

• assist the creditors in a class he represents in understanding the discussions and considerations of the committee meetings and facilitate informed decision-making;
• review the contents of minutes prepared by the RP and provide his comments to the resolution professional, if any;
• help the creditors in a class he represents during the consultations made by the RP to prepare a strategy for marketing of the assets of the corporate debtor in terms of sub-regulation (1) of regulation 36C;
• work in collaboration with the creditors in a class he represents to enhance the marketability of the assets of the corporate debtor in terms of sub-regulation (3) of regulation 36C;
• assist the creditors in a class he represents in evaluating the resolution plans submitted by resolution applicants;
• ensure that the creditors in a class he represents have access to any information or documents required to form an opinion on issues discussed in the committee meetings;
• update regularly the creditors in a class he represents on the progress of the corporate insolvency resolution process;
•  make suggestions for modifications of the resolution plan as may be required by the creditors in class he represents;
• record proceedings and prepare the minutes of the meeting with the creditors in a class he represents; and
• act as a representative for the creditors in a class he represents in representations before the Adjudicating Authority, National Company Law Appellate Tribunal, and other regulatory authorities.

The newly inserted Regulation 13(11) provides that the provisions regarding minutes of meetings in this regulation shall apply mutatis mutandis for clause (i) of sub-regulation (10).

The newly inserted Regulation 13(12) provides that the creditors in a class may propose any additional responsibility upon the authorized representative in relation to the representation of their interest in the committee.

Transfer of debt due to creditors

The amendment substituted a new Regulation to Regulation 28(1).  The newly substituted Regulation 28(1) provides that in the event a creditor assigns or transfers the debt due to such creditor to any other person during the insolvency resolution process period, both parties shall, within 7 days of such assignment or transfer, provide the interim resolution professional or the resolution professional, as the case may be, the terms of such assignment or transfer and the identity of the assignee or transferee.

Audit of corporate debtor

The amendment inserted a new Regulation 30B dealing with the audit of corporate debtor.  The newly inserted Regulation 30B provides that-

• Any member(s) of the committee may propose an audit of the corporate debtor along with the objectives, scope, estimate of the costs, timeframe and name(s) of the proposed auditor(s).
• A proposal made under sub-regulation (1) shall be considered as per sub-regulation (3) of regulation 18 and an audit shall be conducted if such proposal is approved by the committee.
• The audit shall be conducted by an insolvency professional having qualifications required for such audit.
• The auditor shall prepare a report detailing his findings and the same shall be presented before the committee along with the comments of the interim resolution professional or the resolution professional, as the case may be.
• The expenses of such audit shall be treated as insolvency resolution process costs.

Request for Resolution plan

Regulation 36B provides the procedure for the request to prospective resolution applicants for submission of resolution plan.  The amendment substituted a new regulation to Regulation 36B(1).  The newly substituted Regulation 36B(1) provides that the RP shall, within 5 days of the date of issue of the final list, issue the information memorandum, evaluation matrix and a request for resolution plans to every resolution applicant in the final list.  Where such documents are available, the same may also be provided to every prospective resolution applicant in the provisional list.

Model timeline for CIRP

Regulation 40A provides the time line to be followed in CIRP.  The amendment substituted new rows for the existing rows for Regulation 36B.  The newly substituted rows for Regulation 36B provides-

• Issue of RFRP, including Evaluation Matrix and IM - Within 5 days of the issue of the final list - T + 105
• Receipt of Resolution Plans - At least 30 days from issue of RFRP (Assume 30 days) - T + 135 days.

Timeline for filing of forms

Regulation 40B provides the timeline for filing forms under regulations.  The amendment substituted new rows in Regulation 40B(1A) to row Nos. 3 and 4.  The newly substituted rows are as detailed below-

3. Information memorandum is not issued within 92 days from the date of public announcement

4. RFRP is not issued within 10 days from the date of issue of information memorandum to the committee

For row 3 and 4, the timeline for filing CIRP 7 for the first time-

• X+30th day,
• X+60th day,
• X+90th day and so on, till the activity is complete.

Form G

The amendment substituted a new Form G for the existing one.

Form H

The amendment inserted para 6A in Form H.  Para 6A requires that Minutes of the committee meeting relating to discussion and decisions about resolution plan are attached with the certificate.

In para 10 the rows in respect of Regulation 36(1) and Regulation 36A are substituted as-

• Regulation 36(1) - Submission of Information Memorandum to CoC - T+95
• Regulation 36A-

• Invitation of EoI - T+60;
• Publication of Form G - T+60;
• Provisional List of Resolution Applicants  - T+85;
• Final List of Resolution Applicants - T+100.