Tag Archives: bankruptcy

Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) (Fourth Amendment) Regulations, 2018

The Insolvency and Bankruptcy Board of India, vide its notification dated 5 October 2018 amended the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 by notifying the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) (Fourth Amendment) Regulations, 2018.

The key changes brought through this amendment are as follows:

  • Omitted the meaning of dissenting financial creditors as given in Regulation 2 (1) (f) of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016.
  • Removal of the requirement under Regulation 21(3) (b), for the notice of the meeting of committee of creditors to state that the vote of the members of committee should not be taken unless all the members are present at such meeting.

Amendments in the voting process of the committee of creditors

  1. Amendment of Regulation 25 (5) has been brought to provide for the detailed voting procedure by electronic means in case a member is not present for a meeting. The amended regulations now also provide for the circulation of minutes to the authorized representatives in addition to the creditors. The authorized representative is obligated to circulate the minutes of meetings received by it, to the 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.
  2. Addition of sub-regulation 1A to Regulation 26 which provides that the authorized representative shall exercise the votes either by electronic means or through electronic voting systems as per voting instructions received by him from the creditors in the class.

Resolution Plan

  1. Substitution of sub-regulation (1) of Regulation 38 which now provides that the mandatory content of the resolution plan shall provide that the amount due to operational creditors under a resolution plan must be given priority in payment over financial creditors. Earlier the provision provided for specifying the insolvency resolution process costs providing that the insolvency resolution process costs will be paid in priority to any other creditors;
  2. Omission of Regulation 39 (1) (b), the requirement of providing an undertaking by the prospective resolution applicant that he shall provide additional funds to the extent required is no longer required.
  3. Omission of sub-regulation (3A) of Regulation 39, the committee is no longer required to specify the amounts payable from resources in the contents of the resolution plan, while approving the same.
  4. Addition of regulation 39A, which provides for preservation of records. It states that the Interim Resolution Professional or the Resolution Professional shall preserve physical and electronic copy of the records relating to corporate insolvency process of the corporate debtor as per the record retention schedule that the Insolvency and Bankruptcy Board may communicate in consultation with the Insolvency Professional Agencies.

Sources

  1. https://ibbi.gov.in/webadmin/pdf/whatsnew/2018/Oct/CIRP%20Amendment-5.10.2018_2018-10-05%2023:21:24.pdf
  2. https://ibbi.gov.in/webadmin/pdf/legalframwork/2018/Aug/Insolvency%20and%20Bankrutpcy%20Code,%202016%20(31%20of%202016)%20upto%20date%20amendment%2017.08.2018_2018-08-19%2013:27:42.pdf.
  3. https://ibbi.gov.in/webadmin/pdf/legalframwork/2017/Oct/CIRP%20Regulations%20-%20after%202nd%20Amendment_2017-10-24%2017:32:27.pdf.
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Fast Track Insolvency Resolution Regulations

With an aim to complete an insolvency petition even faster, in 90 days, for small companies, companies where there are not a lot of transactions / operations, the Insolvency and Bankruptcy Board of India  has notified the sections 55 to 58 of the Insolvency and Bankruptcy Code 2016 and the draft of Insolvency and Bankruptcy Board of India (Fast Track Insolvency Resolution Process for Corporate Persons) Regulations, 2017 with effect from 14 June 2017.

It is believed that these regulations help in faster and easier completion of bankruptcy proceedings.

The fast track process applies to the following categories of corporate debtors:

  • a small company, as defined under clause (85) of section 2 of the Companies Act, 2013;
  • a Startup (other than the partnership firm), as defined in the notification dated 23 May 2017 of the Ministry of Commerce and Industry;
  • an unlisted company with total assets, as reported in the financial statement of the immediately preceding financial year, not exceeding Rs.1 crore.

The criteria for an Insolvency Resolution Professional (IRP) are:

  • An insolvency professional can be resolution professional if he, all his partners and directors are independent of the corporate debtor.
  • Not eligible if he or the insolvency professional entity of which he is a partner or director,is under a restraint order of the Board.
  • Shall not continue as resolution professional of he or entity where he is director or partner or any other of his director or partner represents any other stakeholders in the same fast track process.

The Insolvency and Bankruptcy Board of India (Fast Track Insolvency Resolution Process for Corporate Persons) Regulations, 2017 also provides that if committee thinks that fast track process cannot be completed within 90 days then it may instruct the resolution professional to make an application to the Adjudicating Authority. However, the Adjudicating Authority may, if satisfied, extend the period of 90 days by a further period up to 45 days for completion of the process.

Further, Interim Resolution Professional (IRP) shall file a report certifying constitution of committee to Adjudicating Authority before expiry of 21 days from the date of his appointment. Based on records, if interim resolution professional is of opinion that fast track process is not applicable to corporate debtor, he shall file an application to Adjudicating Authority along with the report to pass an order converting the fast track process to corporate insolvency resolution process. If Adjudicating Authority passes on order of such conversion, the process shall be carried on in accordance with Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016.

Source: http://www.ibbi.gov.in/RegulationsonFastTrackCorporateResolutionProcess.pdf