LATEST AMENDMENTS TO ‘IBBI (INSOLVENCY RESOLUTION PROCESS FOR CORPORATE PERSONS) REGULATIONS, 2016

[Mr. M. GOVINDARAJAN]

Vide Notification No. IBBI/2023-24/GN/REG113, dated 15.02.2024 the Insolvency and Bankruptcy Board of India made amendments to the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 which came into effect from 15.02.2024.  The following are the amendments carried out by the amendment dated 15.02.2024-

Separate bank account for real estate project

The amendment inserted a new Regulation 4D which requires the interim resolution processional or resolution professional to operate a separate bank account for each real estate project.

Meetings of CoC

Regulation 18(1) provides that a resolution professional may convene a meeting of the committee as and when he considers necessary.  The amendment substituted a new regulation 18(1) for the existing one.  The newly substituted Regulation 18(1) provides that a resolution professional shall convene a meeting of the committee before lapse of thirty days from the last meeting.  The committee may decide to extend the interval between such meetings subject to the condition that there shall be at least one meeting in each quarter.

Voting procedure

Regulation 25(5)(b) provides that the resolution professional shall seek a vote of the members who did not vote at the meeting on the matters listed for voting, by electronic voting system in accordance with regulation 26 where the voting shall be kept open for at least twenty-four hours from the circulation of the minutes.

The amendment substituted a new on for Regulation  25(5)(b) in which there is  a minimum period specified for the opening of the voting window with no upper limit,.  The newly substituted Regulation 25(5)(b) empowers the Committee of Creditors to decide the period of opening of electronic voting window with a minimum of twenty-four hours and a maximum of seven days with further increments of twenty-four hours each.  If there is a  request for extension made by a creditor, the voting window shall be extended in increments of twenty-four hours period.  Where the matters listed for voting have already received requisite majority vote, the Resolution Professional shall provide one last opportunity to vote by extending the voting window by a maximum period of twenty-four hours.

Costs

Chapter IX of the Regulation (Regulation 31 to 34B) deal with the insolvency resolution process cost.  The amendment inserted a new Regulation 31B.  The newly inserted new Regulation 31B provides that the insolvency professional shall place in each meeting of the committee, the operational status of the corporate debtor and shall seek its approval for all costs, which are part of insolvency resolution process costs.

Valuation methodology

Regulation 35(1) provides that the two registered valuers appointed under regulation 27 shall submit to the resolution professional an estimate of the fair value and of the liquidation value computed in accordance with internationally accepted valuation standards, after physical verification of the inventory and fixed assets of the corporate debtor.

The amendment inserted a provision to Regulation 35(1) which provides that the resolution professional shall facilitate a meeting wherein registered valuers shall explain the methodology being adopted to arrive at valuation to the members of the committee before computation of estimates.

The amendment also substituted Regulation 35(2) which provides that after the receipt of resolution plans in accordance with the Code and these regulations, the resolution professional shall provide the fair value, the liquidation value and valuation reports to every member of the committee in electronic form, on receiving an undertaking from the member to the effect that such member shall maintain confidentiality of the fair value, the liquidation value and valuation reports and shall not use the information contained in the valuation reports to cause an undue gain or undue loss to itself or any other person and comply with the requirements under section 29(2).

Information memorandum

Regulation 36(2) provides the list of information which serves as a comprehensive document conveying significant information about the corporate debtor including its operations, financial statements, to the prospective resolution applicant and shall contain the following details of the corporate debtor (sub regulations (a) to (k).  The amendment inserted a new sub regulation (ka) provides that the committee may decide not to disclose the fair value if, for reasons to be recorded in writing, it considers such non-disclosure to be beneficial for the resolution process. 

Flexibility

Regulation 36A (1) provides that the resolution professional shall publish brief particulars of the invitation for expression of interest in Form G of the Schedule-I at the earliest, not later than sixtieth day from the insolvency commencement date, from interested and eligible prospective resolution applicants to submit resolution plans.

The amendment inserted clarification to the Regulation 36A(1) which provides that the resolution professional after the approval of the committee may invite a resolution plan for each real estate project or group of projects of the corporate debtor.

Mandatory contents of Resolution Plan

Section 38 gives the list of mandatory contents that are to be provided in a resolution plan.  The amendment inserted new sub regulations (4) and (5).  The said amendments enable the CoC to decide for constitution of a monitoring committee for overseeing the implementation of the resolution plan. The committee may include the Resolution Professional, any other insolvency professional or any other person as its member. In case the Resolution Professional is made part of the committee, the monthly fee payable to him shall not exceed the monthly fee received by him during the corporate insolvency resolution process.

Continuation of CIRP pending extension application

Regulation 40(1) provides that the committee may instruct the resolution professional to make an application to the Adjudicating Authority under section 12 to extend the insolvency resolution process period.  Regulation 40(2) provides that the resolution professional shall, on receiving an instruction from the committee under this Regulation, make an application to the Adjudicating Authority for such extension.

The amendment inserted a clarification which provides that the resolution professional shall continue to discharge his responsibilities under the corporate insolvency resolution process, till the application for extension is decided by the Adjudicating Authority.

This will enable the CIRP to be continued when the application is pending before the Adjudicating Authority seeking extension of time for CIRP.