Introduction:

The Insolvency and Bankruptcy Board of India amended regulations regarding Corporate Insolvency Resolution Process wherein it has stated that the resolution plans with respect to Section 30 and Section 31 of the Insolvency and Bankruptcy Code, 2016, will be required to contain details of the resolution applicant as well as the connected Persons.

The Insolvency and Bankruptcy Board of India (hereinafter referred as ‘IBBI’) vide Notification Nos. IBBI/2017-18/GN/REG019[1] and IBBI/2017-18/GN/REG020[2], dated November 7, 2017, amended the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016[3], and the IBBI (Fast Track Insolvency Resolution Process for Corporate Persons) Regulations, 2017[4] respectively (hereinafter together referred as ‘principal regulations’). Both these amendments came into force on November 7, 2017.

A detailed resolution plan:

The insolvency resolution of corporate persons in a time bound manner for maximization of value of their assets is a key objective of the Insolvency and Bankruptcy Code and the Committee of Creditors is thus, expected to carry out due diligence of every resolution plan to satisfy itself that the plan is viable and further, the persons who have submitted the plan and who would implement the plan are credible, to avoid the plans which may lead to liquidation, post resolution, and to select the most suitable plan under the circumstances.[5]

In furtherance of this objective, as per the amended regulations, a resolution plan under the principal regulations shall contain details of the following persons to enable the committee to assess the credibility of such applicant and other connected persons to take a prudent decision while considering the resolution plan for its approval:

  1. Resolution applicant;
  2. Persons who are promoters or in management or control of the resolution applicant;
  3. Persons who will be promoters or in management or control of the business of the corporate debtor during the implementation of the resolution plan; and
  4. Holding companies, subsidiary companies, associate companies and related parties of persons in point (2) and point (3).

The details of the resolution plan shall disclose details of identity, convictions for any offence in the preceding five years, pending criminal proceedings, disqualifications under the Companies Act, 2013, identification as a willful defaulter by any bank or financial institution in accordance with the guidelines of the Reserve Bank of India, debarment, from accessing to, or trading in, securities markets under any order or directions of the Securities and Exchange Board of India, and lastly, the transactions, with the corporate debtor in the preceding two years.

Further, amendments also make it compulsory for the resolution professional to submit all resolution plans which comply with the requirements of the Code and regulations made thereunder, along with details of the following transactions to the Committee of Creditors:

  1. preferential transactions under section 43;
  2. undervalued transactions under section 45;
  3. extortionate credit transactions under section 50;
  4. Fraudulent transactions under section 66 of the Insolvency and Bankruptcy Code, 2016; and
  5. The orders of the adjudicating authority in respect of such transactions.

Conclusion

It can be said that before the approval of the resolution plan which states how it has dealt with the interests of all stakeholders of the Corporate Debtor, the resolution applicants and connected persons will now be put under a strict test for ensuring their credit worthiness and credibility.