HSA | Restructuring & Insolvency Monthly Update | October 2023 - Insolvency/Bankruptcy

IBBI (Insolvency Resolution Process for Corporate Persons) (Second Amendment) Regulations, 2023

The Insolvency and Bankruptcy Board of India (IBBI) vide notification dated September 18, 2023 notified the IBBI (Insolvency Resolution Process for Corporate Persons) (Second Amendment) Regulations, 2023 (CIRP Second Amendment Regulations).
By way of CIRP Second Amendment Regulations, IBBI has inserted Regulations 2D, 3A and 30B in the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 (CIRP Regulations) and caused amendment in Regulations 12, 13, 16A, 28, 36B, as detailed below.
By way of Regulation 2D, IBBI addresses the aspect of limitation at the very inception of the insolvency proceedings by requiring the Creditor to submit an affidavit or a similar document detailing the chronology of the debt and default, and explaining why the application is not barred by limitation.
By way of the Regulation 3A, the IBBI lays down the manner of control and custody to be taken by the Interim Resolution Professional to ensure timely communication of the crucial information in respect of the Corporate Debtor for smooth conduct of Corporate Insolvency Resolution Process (CIRP). Regulation 3A(1) provides for the information to be handed over to the Interim Resolution Professional by the promoters or any other person associated with the management of the Corporate Debtor, as the case may be and lays down the guidelines for the manner in which such information is required to be handed over in Regulations 3A(2) to 3A(6). Regulation 3A(7) provides that any application made under Section 19(2) of the Insolvency and Bankruptcy Code, 2016 (Code) must show presence of such asset or record in the notice of requisition and the absence of such asset or record in the list of assets and records taken under custody in terms of Regulations 3A(2) and (3).
By way of the amendment to Regulation 12, the IBBI seeks to enhance the comprehensiveness and inclusiveness of the claim gathering process and increase the transparency in the management of claims. The above amendments extend the timeline for submission of claim by a Creditor beyond the stipulated timeline of in the public announcement up to the date of issuance of request of Resolution Plans by the Resolution Professional under Regulation 36B of the Code. The amended Regulation cast a mandate on the Creditor to provide reasons for delay in submitting the claim beyond the period of 90 days from the insolvency commencement date. The above amendment is also aimed at reducing the burden on the Adjudicating Authority on account of litigations arising due to rejection of claim on the ground of delay.
The amendment to Regulation 13 corresponds to the amendment in Regulation 12 of the CIRP Regulations and provides for the manner in which the Interim Resolution Professional/Resolution Professional shall collate and verify claims received after the timeline stipulated in Regulation 12. The above amendment also mandates the Resolution Professional to provide for reasons for rejection of any claim to enhance the transparency and provide clarity to the Creditors whose claims have been rejected.
By way of the amendment to Regulation 16A, the IBBI has brought about the following:
- Firstly, IBBI clarifies the role of an authorized representative and elaborated his duties under the provisions of the Code. The authorized representative is required to perform a dual role by (a) ensuring that the CoC fulfils all its obligations in terms of his professional expertise and (b) being explicitly responsible to protect the interests of the class of Creditors he represents. The above amendments casts several duties on the authorized representative of a class of Creditors including helping the members understand the issues discussed in the CoC meetings in order to take a considered decision, help the Resolution Professional to increase the marketability of the assets of the Corporate Debtor, evaluate the Resolution Plans, review the minutes of CoC meeting and provide his comments, represent the class of Creditors before the adjudicatory and regulatory authorities, etc. This amendment aims to facilitate the Creditors in a class to have an effective representation in the CoC and take informed decisions.
- Secondly, the IBBI empowers the class of Creditors to replace their authorized representative and provides the manner for appointment of authorized representative.
- Thirdly, the IBBI substitutes the sub-Regulation (8) of Regulation 16A to increase the fee structure of an authorized representative of class of Creditors.
By way of the amendment to Regulation 28, IBBI imposes a timeline of seven days on both the parties, to inform the event of assignment or transfer if debt to the Interim Resolution Professional or the Resolution Professional, as the case maybe.
By way of the insertion of Regulation 30B, keeping in view the complexity of several CIRPs, the IBBI empowers the member(s) of CoC to propose and audit of the Corporate Debtor in order to ensure transparency and accountability and the financial soundness of the process.
By way of the new Section 36B, which is substituted in the place of the earlier provision, IBBI imposes a timeline of five days on the Resolution Professional on issuance of the information memorandum, evaluation matrix and request for Resolution Plans to every resolution applicant in the final list, which was earlier from the issue of provisional list. Accordingly, the model timelines stipulated under Regulation 40A have been amended.

IBBI (Model Bye-Laws and Governing Board of Insolvency Professional Agencies) (Amendment) Regulations, 2023

The IBBI vide notification dated September 18, 2023 notified IBBI (Model Bye-Laws and Governing Board of Insolvency Professional Agencies) (Amendment) Regulations, 2023 (Model Bye Laws Amendment Regulations).
By way of this amendment, IBBI has caused amendment in the para VI and para XI of the Schedule of the IBBI (Model Bye-Laws and Governing Board of Insolvency Professional Agencies) Regulations, 2016 (Model Bye-Laws Regulations). Through this amendment, IBBI aims to simplify the process of enrolment and registration by the Insolvency Professionals (IPs) and ensure a simpler, faster and user-friendly process for the applicants. It also ensures transparency, accountability, and faster processing of applications by the Insolvency Professional Agencies (IPAs).

IBBI (Insolvency Professionals) (Second Amendment) Regulations, 2023

The IBBI vide notification dated September 18, 2023 notified IBBI (Insolvency Professionals) (Second Amendment) Regulations, 2023 (IP Second Amendment Regulations).
By way of the above amendment, the IBBI has amended Regulation 5, 6, 7, 8 and 10 of the IBBI (Insolvency Professional) Regulations, 2016 (IP Regulations) and has inserted Regulations 10A and 10B in the IP Regulations.
Through this amendment, IBBI provides for a focused approach and ease out the multiple requirements for entry into the profession and ensures that the applicants are well versed with theoretical and practical aspects and multi-disciplinary skills delivered through the specialized institution, without compromising the quality. IP Second Amendment Regulations also ensures that the knowledge will be updated, practical aspects will be tested, and limitation of objective type question of examination will be mitigated.
By way of the above amendment, IBBI proposes simplification of enrolment and registration process to ensure a simpler, faster, and user-friendly process for the applicants. This will also reduce duplication of application submission requirements and consequently reduce the number of stages required for registration as an Insolvency Professional (IP). By streamlining the administrative process, IBII also brings in transparency, accountability, and faster processing of applications on the part of Insolvency Professional Agencies (IPAs).
The proposed amendments in the IP Second Amendment Regulations are corresponding to the amendments in Model Bye Laws Regulations and address the procedural gaps in the status of registration of an IP upon suspension of the professional member, surrender of professional membership with IPA, expulsion of the professional member and upon receipt of intimation of demise/winding up/dissolution of IP. This will bring clarity on the status of professional membership/enrolment and registration and related compliances which are required to be done by the IPs.
In view of the above amendments, IBBI, by way of IP Second Amendment Regulations have also substituted Form A and the Form AA mentioned in the second schedule of IP Regulations, which can be accessed at f76838225028debe733984fb02cd2ec3.pdf (ibbi.gov.in).

Circular on filing of CIRP Forms for the purpose of monitoring CIRPs and performance of Insolvency Professional Entities

Regulation 40B of CIRP Regulations provides for submission of records and information by an Insolvency Professional (IP) to the IBBI for monitoring the processes and performance of IPs on the electronic platform hosted on the website of the IBBI.
The IBBI vide IBBI (Insolvency Professionals) (Fourth Amendment) Regulations, 2022 dated September 28, 2022 allowed the insolvency professional entities (IPEs) to get enrolled, registered and act as IPs for conducting the insolvency processes under the Code. However, the facility for submitting the CIRP Forms in accordance with Regulation 40B was not made available to the IPEs acting as IPs and hence, these IPEs were unable to submit the relevant CIRP Forms on the website of the IBBI for the processes/assignments handled by them.
By way of this Circular, the facility for submitting the CIRP Forms has been now extended to IPEs acting as IPs also. These IPEs shall access the platform with a unique username and password provided by the IBBI and authorize an IP handling the process to upload/submit the CIRP Forms. Thereafter, the authorized IP shall submit the CIRP Forms along with relevant information and records through his username and password as provided to him in capacity of individual IP.
The Circular also clarifies that in view of the facility being introduced now, CIRP Forms filed till September 30, 2023 shall not attract any fee as provided under Regulation 40B of the CIRP Regulations. Thereafter, it shall attract fee as specified in sub-Regulation (4) of Regulation 40B of the CIRP Regulations.
The Circular further clarifies that the contents of Circular no. IBBI/CIRP/023/2019 dated August 14, 2019, Circular no. IBBI/CIRP/41/2021 dated March 18, 2021 and Circular no. IBBI/CIRP/42/2021 dated July 20, 2021, which facilitates submission of records and information by IPs, shall now apply to all the assignments handled by IPRs acting as IPs.

Clarification under Clause (b) of sub-Regulation (2) of Regulation 4 of IBBI (Liquidation Process) Regulations, 2016

Regulation 4 of the IBBI (Liquidation Process) Regulations, 2016 (Liquidation Regulations) provides for fee payable to a Liquidator. Such fee is decided either by the Committee of Creditors of the stakeholders' consultation committee, as the case maybe. In the event the fee is not fixed by the CoC or the SCC, Regulation 4(2)(b) provides that Liquidator shall be entitled to a fee as a percentage of the amount realized net of the other liquidation costs, and of the amount distributed, for the balance period of liquidation, as mentioned therein.
By way of the Circular, IBBI aims to remove any ambiguity in interpretation of the terms mentioned in Regulation 4(2)(b) of the Liquidation Regulations and clarifies as under:
- The term 'amount realized' shall mean amount realized from assets other than liquid assets such as cash and bank balance including term deposit, mutual fund, quoted share available on start of the process after exploring compromise and arrangement, if any.
- The term 'other liquidation cost' in Regulation 4(2)(b) of the Liquidation Regulations shall mean liquidation cost paid in priority under Section 53(1)(a), after excluding the Liquidator's fee.
- The term 'Amount distributed to stakeholders' shall mean distributions made to the stakeholders, after deducting CIRP and liquidation cost.
- The term 'amount of realization/distribution' shall mean cumulative value of amount realized/distributed which is to be bifurcated in various slabs as per column 1 and thereafter the same is to be bifurcated into realization/distribution in various periods of time and then corresponding fee rate from the table is to be taken.
As regards the period for calculation of fee, IBBI has clarified that Exclusion for purpose of fee calculation is to be allowed only when the same has been explicitly provided by the Hon'ble NCLT/NCLAT or any other Court of law and will operate only for the asset which could not have been realized during the excluded period.
The IBBI further clarifies that in cases where excess Liquidator's fee is returned and distributed on or before October 31, 2023 no disciplinary proceedings will be initiated on the ground that the excess fee was charged and has now been returned.

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