Introduction
The Insolvency and Bankruptcy Board of India (‘IBBI’) through Press Release[i], has recently implemented substantial amendments to the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016. These amendments, effective from 15.02.2024, aim to enhance the efficiency and transparency of the corporate insolvency resolution process (‘CIRP’).
Key Modifications
Operating Separate Bank Accounts for Real Estate Projects: The amendment mandates the maintenance of separate bank accounts for each real estate project under a corporate debtor. This measure is designed to ensure the segregation of financial transactions, enhancing financial transparency and accountability across projects.
Monthly Meetings, Maximum Impact: The resolution professionals (‘RPs’) are now required to convene committee of creditors (‘CoC’) meetings at least once every thirty days, with flexibility for extension up to one meeting per quarter if the CoC decides so, ensuring regular and efficient stakeholder engagement.
Voting Procedures: The amendment empowers the CoC to determine the period of opening the electronic voting window, with a minimum of twenty-four hours and a maximum of seven days, further allowing increments of twenty-four hours. Additionally, the RP is required to provide one last opportunity to vote by extending the voting window by a maximum period of twenty-four hours for matters already receiving the requisite majority votes. This highlights the commitment to flexible and inclusive decision-making processes.
Approval of Insolvency Resolution Process Costs: RPs must seek approval from the CoC for all costs related to the insolvency resolution process, including going concern costs. This enhancement in CoC oversight aims to promote fiscal responsibility and transparency.
Disclosure of Valuation Methodology: The amendment mandates the explanation of valuation methodology to CoC members by the RP before the computation of estimates. This is aimed at increasing transparency and reducing disputes over valuation issues.
Disclosure of Fair Value: Fair value should now be included in the information memorandum (‘IM’), subject to CoC discretion. This aims to enrich informed participation by elucidating asset valuations, with a non-disclosure provision, should the CoC deem it counter-productive to the resolution process.
Flexibility in Inviting Resolution Plans (‘plan’) in Real Estate Cases: The amendment provides clarity for the CoC to direct the RP to invite separate plans for each project in real estate cases, recognizing the need for tailored treatment based on individual project requirements.
Monitoring Committee for Plan Implementation: The CoC is empowered to constitute a monitoring committee comprising the RP, other insolvency professionals, or any other person to oversee plan implementation, with limitations on RP remuneration to maintain fiscal discipline.
Continuation of Resolution Process Pending Extension Application: Clarifications are provided to ensure that RPs continue to discharge their responsibilities throughout the resolution process, even while extension applications are decided by the Adjudicating Authority, thereby maintaining procedural momentum.
Conclusion
The recent amendment to the CIRP Regulations by the IBBI represents a significant step towards enhancing transparency and efficiency in insolvency proceedings. By introducing measures such as establishing separate bank accounts for real estate projects, convening monthly CoC meetings, and implementing flexible voting procedures, the amendment aims to streamline decision-making and improve creditor oversight. These changes underscore the commitment to fair resolution outcomes and signify a positive shift towards a more robust insolvency framework in India. Successful implementation and active stakeholder engagement will be crucial in realizing the intended benefits of these amendments in practice.
End Note:
[i] Press Release No. IBBI/PR/2024/09, dated 16.02.2024.
Authored by Priyavansh Kaushik, Advocate at Metalegal Advocates. The views expressed are personal and do not constitute legal opinion.