On February 15, 2024, the Insolvency and Bankruptcy Board of India ("IBBI") amended the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 ("CIRP Regulations") vide the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) (Amendment) Regulations, 2024 ("CIRP Amendment Regulations").
IBBI had previously published two separate discussion papers on measures for increasing the possibility of resolution, value of resolution plan and enabling timely resolution on November 1, 2023 ("Discussion Papers"), which analyzed several issues that were adversely affecting the efficiency and effectiveness of the resolution process especially for real estate insolvencies. In an attempt to resolve the aforesaid issues, IBBI has now amended the CIRP Regulations. A brief overview of the amendments made pursuant to the CIRP Amendment Regulations is as follows:
Operating a separate bank account for each real estate project
After regulation 4C in the CIRP Regulations, regulation 4D has been inserted which provides that where the corporate debtor has any real estate project, the interim resolution professional ("IRP") or the resolution professional ("RP"), as the case may be, shall mandatorily operate a separate bank account for each real estate project.
Interval Between CoC meetings
Regulation 18(1) of the CIRP Regulations has been substituted and it has now been mandated that a RP shall convene a meeting of the Committee of Creditors ("CoC") within thirty days from the last convened meeting. However, the CoC may decide to extend the interval between such meetings subject to the condition that there shall be at least one meeting in each quarter.
Timeframe of Voting Period
Regulation 25 (5) (b) of the CIRP Regulations has been substituted and it provides that the voting shall be kept open for a minimum period of twenty-four hours from the circulation of minutes and shall not exceed seven days.
However, on a request for extension made by a creditor, the voting window shall be extended in increments of twenty-four hours period. It also stipulates that the RP shall not extend the voting window where the matters listed for voting have already received the requisite majority vote and one extension has been given after the receipt of requisite majority vote.
Approval of CoC for insolvency resolution process cost
To enhance monitoring by the CoC during the corporate insolvency resolution process ("CIRP"), Regulation 31B of the CIRP Regulations has been inserted which mandates that a RP shall place in each meeting of the CoC, the operational status of the corporate debtor and shall seek CoC's approval for all costs, which are part of insolvency resolution process costs.
Discussion of valuation methodology between registered valuers and CoC and sharing of valuation report with CoC Member
In Regulation 35 (1) (a) of the CIRP Regulations, a proviso has been inserted which mandates that a RP shall facilitate a meeting between the registered valuers and the CoC to explain the methodology being adopted to arrive at valuation before computation of estimates.
Additionally, the RP shall provide the valuation report alongwith fair value and liquidation value with every CoC member on the same conditions provided thereunder.
Disclosure of fair value in the Information Memorandum
Regulation 36 (2) (ka) of the CIRP Regulations has been amended to provide that the information memorandum to be shared with the prospective resolution applicants shall include the fair value of the corporate debtor.
Invitation of project wise resolution plan
A clarification has been inserted in Regulation 36A (1) of the CIRP Regulations which provides that the RP after the approval of the CoC may invite a resolution plan for each real estate project or group of projects of the Corporate Debtor.
Mandatory contents of resolution plan to include details of monitoring committee
Regulation 38 of the CIRP Regulations has been amended and sub-regulations 4 and 5 are inserted which provides that the CoC may consider the requirement of a monitoring committee for the implementation of the resolution plan.
It further provides that where the CoC considers that a monitoring committee for the implementation of the resolution plan is required, it may, while approving the resolution plan, decide to constitute the same with the RP or propose another insolvency professional, or any other person as its members. However, where the RP is proposed to be part of the monitoring committee, the monthly fee payable to him shall not exceed the monthly fee received by him during the CIRP.
Continuation of process activities pending disposal of extension application by the Adjudicating Authority ("AA")
A clarification has been inserted under regulation 40 of the CIRP Regulations which provides that the RP should continue to discharge its responsibilities under CIRP for the period during the pendency of the application before the AA seeking extension of the CIRP.
Author's View: The aforementioned amendments have been brought in force to streamline many operational difficulties being faced by the professionals under the current framework running the CIRPs. The amendments would also hopefully enhance the participation of the CoC in the CIRP, so that an effective resolution may be achieved so as to meet the objectives of the IBC.
Please find a copy of the CIRP Amendment Regulations, here.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
