Insolvency Regulations Amended By IBBI To Improve Transparency

Insolvency Regulations Amended By IBBI To Improve Transparency

The intent of the amended rules is to reduce the time taken, prevent erosion of value, encourage investor participation, and improve transparency.

The Insolvency and Bankruptcy Board of India (IBBI) has amended the Insolvency Resolution Process for Corporate Persons Regulations (CIRP) 2016 with immediate effect as published in the official gazette.

The updated rules make for enhanced participation and performance of the resolution professional, committee of creditors (CoC) and financial creditors. Now resolution professionals can invite expressions of interest for resolution plans’ submission for a corporate debtor either for sale of one or more assets or as a whole. The same requires CoC approval. All the resolution plans submitted to the CoC will also be presented by the resolution professional to facilitate access to sufficient information for decision making. The resolution professional can also be directed by the CoC to invite to committee meetings interim finance providers as observers.

Attending the meetings may help interim finance providers develop a better understanding of the corporate debtor’s operational status. Informed decisions can then be made by them about funding requirements. Additionally, pro rata will be paid to financial creditors who vote against the final resolution plan and they will be given priority over those who vote in favour. The dissenting creditors’ rights are balanced with practical limitations of phased implementation of a resolution plan that allows staged payments. The intent of the amended rules is to reduce the time taken, prevent erosion of value, encourage investor participation, and improve transparency.