Introduction:

The Insolvency and Bankruptcy Board of India (hereinafter referred as ‘IBBI’) vide press release[1] dated March 28, 2018, has amended the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016, and the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016.

A. The salient features of the amendments under the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 are discussed hereunder:

Identification of resolution applicants:

As per the amendments, the resolution professional (hereinafter referred as ‘RP’) shall identify the prospective resolution applicants on or before the 105th day from the insolvency commencement date.

Expenses to be incurred on or by the IRP:

The regulations earlier provided that expenses whether incurred on or by the interim resolution professional or the RP shall be determined by the Committee of Creditors and form part of insolvency resolution process costs.

The amendments state that such expenses means:

  1. the fee to be paid to the interim resolution professional;
  2. the fee to be paid to insolvency professional entity, if any; and
  3. the fee to be paid to professionals, if any, and other expenses to be incurred by the interim-RP or the RP.

Disclosure of resolution process costs:

As per the amendments, the interim-RP or the RP shall disclose item-wise insolvency resolution process costs in the manner prescribed by the IBBI.

Claims by creditor to state whether or not related party:

A financial creditor submitting a claim to the interim-RP will be required to declare whether or not it is a related party to the corporate debtor.

Requirement of affidavit for submission of claims:

The amendments have dispensed with the requirement of affidavit from the claimant for the submission of claims.

B. The salient features of the amendments under the Insolvency and Bankruptcy Board of India (Liquidation Process) (Amendment) Regulations, 2018 are:

Selling assets:

Earlier regulations allow the liquidator to sell an asset on a standalone basis as well as to sell the assets in a slump sale, a set of assets collectively, or the assets in parcels.

The amendments have further allowed the liquidator to sell the corporate debtor as a going concern.

Interest on interim finance:

The amendments have now stated that the liquidation cost shall include interest on interim finance for a period of twelve months or for the period from the liquidation commencement date till repayment of interim finance, whichever is lower.

Effective date:

These amendment regulations were made effective from April 1st, 2018.

Remarks:

The amendments to the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 and the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016 have made necessary changes in the insolvency resolution and liquidation process. The amendments are expected to ensure the following:

  1. Timely identification of resolution applicants;
  2. Proper valuation of insolvency resolution process costs;
  3. Disclosure of resolution process costs in prescribed manner;
  4. Disclosure of related parties amongst creditors; and
  5. Appropriate valuation and liquidation of assets.