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TMI BlogPROPOSED AMENDMENTS IN IBBI(CORPORATE INSOLVENCY RESOLUTION PROCESS) REGULATIONS, 2016X X X X Extracts X X X X X X X X Extracts X X X X ..... PROPOSED AMENDMENTS IN IBBI(CORPORATE INSOLVENCY RESOLUTION PROCESS) REGULATIONS, 2016 - By: - Mr. M. GOVINDARAJAN - Corporate Laws / IBC / SEBI - Dated:- 5-7-2024 - The Insolvency and Bankruptcy Board of India proposed to make amendments in The Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 . This amendment proposes to bring changes to- Section 16A - Authorized representative; Section 27 Appointment of professionals; Section 35 - Fair and liquidation value; Section 37(f) - contents of resolution plan. Amendment to Section 16A Section 16A (1) provides that the interim resolution professional shall select the insolvency professional, who is the choice of the highest number of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... financial creditors in the class in Form CA received under sub-regulation (1) of regulation 12 , to act as the authorized representative of the creditors of the respective class. The proviso to this section provides that the choice for an insolvency professional to act as authorized representative in Form CA received under sub-regulation (2) of regulation 12 shall not be considered. Now the amendment proposed to insert a new proviso to Section 16A(1) which provides that the insolvency professional selected under sub-regulation (1) to act as the authorized representative for a class of creditors shall be entitled to attend the meetings of the committee of creditors and perform such duties as provided under Section 25A from the date of submi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssion of the application for his appointment as authorized representative to the Adjudicating Authority till such date of his confirmation by Adjudicating Authority. Amendment to Section 27 Section 27 of the Code provides for the appointment of professionals . Regulation 27(1) provides that the resolution professional shall, within seven days of his appointment but not later than forty-seventh day from the insolvency commencement date, appoint two registered valuers to determine the fair value and the liquidation value of the corporate debtor in accordance with regulation 35 . The amendment proposed to substitute a new section for the existing section 16(1) . The newly substituted section 16(1) provides that the resolution professional shal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l, within seven days of his appointment but not later than forty-seventh day from the insolvency commencement date, appoint registered valuers to determine the fair value and the liquidation value of the corporate debtor in accordance with regulation 35 , as under- a. One registered valuer in case the corporate debtor is a micro, small or medium enterprise under sub-section (1) of section 7 of the Micro, Small and Medium Enterprises Development Act, 2006 or its asset size is up to Rs. 1000 crore as per the latest available balance sheet: Provided that the committee may decide with reasons to be recorded to appoint two registered valuers. b. Two registered valuers in cases other than those covered under sub-regulation (1)(a). Amendment to Se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 35 Section 35 of the Code provides for determination of fair value and liquidation value as detailed below- a. the two registered valuers 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; Provided 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 b. if the two estimates of a value in an asset class are significantly different, or on receipt of a proposal to appoint ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a third registered valuer from the committee of creditors, the resolution professional may appoint a third registered valuer for an asset class for submitting an estimate of the value computed in the manner provided in clause (a). The explanation to this section defines the expressions asset class as the definition provided under the Companies (Registered Valuers and Valuation) Rules, 2017 ; The expression to this section defines the expression significantly different as a difference of twenty-five per cent. in liquidation value under an asset class and the same shall be calculated as (L1-L2)/L1, where, L1= higher valuation of liquidation value L2= lower valuation of liquidation value. (c) the average of the two closest estimates of a valu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e shall be considered the fair value or the liquidation value, as the case may be. The amendment proposed to substitute new sections for the existing Section 35(1)(a), (1)(b) and 1(c) of the Code. The newly substituted provisions 35(1)(a), (1)(b) and (1)(c) provides as below- 35. Fair value and Liquidation value. (1) Fair value and liquidation value shall be determined in the following manner: (a) the registered valuer(s) appointed under regulation 27 shall submit to the resolution professional an estimate of the fair value and of the liquidation value of the corporate debtor computed in accordance with terms of Companies (Registered Valuers and Valuation) Rules, 2017 after physical verification of the inventory and fixed assets of the corp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orate debtor; Provided that the resolution professional shall facilitate a meeting wherein registered valuer(s) shall explain the methodology being adopted to arrive at valuation to the members of the committee before computation of estimates. (b) where two registered valuers have been appointed and the estimates of values are significantly different, or on receipt of a proposal to appoint a third registered valuer from the committee of creditors in cases under sub-regulation (1)(b) of Regulation 27 , the resolution professional may appoint a third registered valuer for submitting an estimate of the value computed in the manner provided in clause (a). (c) where more than one registered valuer has been appointed, the average of the two close ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st estimates of a value shall be considered the fair value or the liquidation value, as the case may be. Explanation. - For the purpose of clause (b), significantly different means a difference of twenty-five per cent. in liquidation value and the same shall be calculated as (L1-L2)/L1, where, L1= higher valuation of liquidation value L2= lower valuation of liquidation value. Amendment to Regulation 37(f) Regulation 37 provides what are to be provided in a resolution plan. A resolution plan shall provide for the measures, as may be necessary, for insolvency resolution of the corporate debtor for maximization of value of its assets, including but not limited to the following: - (f) reduction in the amount payable to the creditors; The amendm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent proposed to insert a proviso to Regulation 37(f) which provides - Provided that a resolution plan shall not prevent the creditors from enforcing their rights against the guarantors of the corporate debtor. - Scholarly articles for knowledge sharing authors experts professionals Tax Management India - taxmanagementindia - taxmanagement - taxmanagementindia.com - TMI - TaxTMI - TMITax ..... X X X X Extracts X X X X X X X X Extracts X X X X
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