Insolvency and Bankruptcy Board of India vide notification dated 21st September, 2023 has issued Agenda Board Notes on IBBI (Insolvency Resolution Process for Corporate Persons) (Second Amendment) Regulations, 2023.
The notes clarifies that the amendment has following objectives:
Enhanced Cooperation by Corporate Debtors
One of the key amendments pertains to the cooperation of corporate debtors (CD) and their personnel with the insolvency resolution professional (IRP) or resolution professional (RP). While the existing regulations required CD personnel to provide information as requested, they did not specify the procedure for taking custody and control of assets and records. The new amendments now mandate the CD’s management and promoters to hand over assets and documents as per a list prepared by the RP. If the CD has not prepared such a list, the RP is responsible for its creation. This ensures clarity and accountability in the process.
Timeline Modifications for Claim Submission
To expedite the resolution process and reduce delays, the amended regulations extend the timeline for creditors to submit claims. Creditors now have 90 days from the insolvency commencement date or the date of the latest request for resolution plans (RFRP) issuance, whichever is later, to submit their claims. Additionally, creditors making claims after this period must provide reasons for the delay, and the RP must explain why they didn’t include such claims earlier. This amendment aims to reduce the burden on the adjudicating authority (AA) and minimize uncertainties.
Empowering the Authorized Representative (AR)
The role of the authorized representative (AR) has been expanded to better serve the interests of creditors in a class (CIC) during the corporate insolvency resolution process (CIRP). ARs will now play a more active role in helping CIC understand issues in CoC meetings, evaluating resolution plans, facilitating communication with the RP, and even suggesting modifications to resolution plans as per CIC requirements.
Revised Fee Structure for ARs
To reflect their increased responsibilities, ARs will see a revised fee structure. The fee will depend on the number of creditors in the class, ensuring fair compensation for their enhanced role in the CIRP process. This change acknowledges the importance of their contributions to the resolution process.
AR Replacement
The new regulations introduce a provision for AR replacement when necessary. Creditors with at least 10% voting power can seek the replacement of an AR and suggest a new insolvency professional. The RP will offer a choice of three IPs, including those suggested by creditors and the current AR. The AA will appoint the AR based on the choice of the highest percentage of voting share among creditors in the class, ensuring transparency and accountability.
Audit Requirement
While the proposal for mandatory audits in certain CIRPs was initially discussed, the final amendment leaves the scope, objective, and necessity of audits to the discretion of the CoC. CoC members can submit proposals for audits, and if approved, the audit costs will be part of the insolvency resolution process cost (IRPC). This approach allows flexibility while maintaining accountability.
