On February 3, 2025, the Insolvency and Bankruptcy Board of India (IBBI) introduced amendments to the Insolvency and Bankruptcy Code, 2016, particularly the Insolvency Resolution Process for Corporate Persons (Amendment) Regulations, 2025. The regulatory changes, published in the Official Gazette, bring notable alterations aimed at enhancing the efficiency and transparency of the insolvency resolution process, especially in cases involving real estate projects and large-scale creditor classes.
- Handing Over Possession and Facilitating Registration
One of the most significant changes in the new regulations is the insertion of Regulation 4E. This regulation mandates that, after securing approval from the Committee of Creditors (CoC) with at least 66% of the votes, the Resolution Professional (RP) must hand over the possession of real estate assets, including plots, apartments, or buildings. This must be done if the allottee has performed their part under the agreement. The RP will also need to facilitate the registration process for the allottee, making the resolution of real estate-related insolvencies more seamless. This change aims to provide better clarity and assurance to creditors involved in real estate projects and ensure that agreements are honored swiftly during the insolvency process.
- Facilitators for Large Creditor Classes
For cases where the number of creditors in a class exceeds 1,000, the new amendments introduce a provision for the appointment of facilitators. Regulation 16C outlines that the CoC may appoint a facilitator, who will assist in communication between the authorized representative and the creditors. This appointment can only be made if at least 100 creditors from the class request it after the first CoC meeting. Additionally, the number of facilitators cannot exceed five, and their fees will be capped at 20% of the fees charged by the authorized representative. This move is designed to improve communication and ensure that the interests of large creditor classes are represented more efficiently.
- Roles and Responsibilities of Facilitators
Under Regulation 16D, the roles and responsibilities of facilitators have been clearly defined. Facilitators will help maintain communication between the sub-classes of creditors and the authorized representative. They will also attend CoC meetings as observers and provide necessary clarifications to creditors regarding the insolvency resolution process. This will ensure a smoother flow of information and enhance the overall transparency of the process.
- Involvement of Competent Authorities in Real Estate Projects
A critical change affecting real estate projects is the new provision in Regulation 18, which allows the Resolution Professional to invite the competent authority, as defined under the Real Estate (Regulation and Development) Act, 2016 (RERA), to attend CoC meetings. This step is intended to improve the decision-making process related to real estate developments, as it brings in expertise from the relevant regulatory bodies. However, the competent authority will not have voting rights in these meetings.
- Reporting on Development Rights and Permissions
Regulation 30C introduces a new requirement for Resolution Professionals (RPs) in real estate insolvency cases. RPs are now tasked with preparing a detailed report on the status of development rights and permissions related to the corporate debtor’s real estate projects. This report must be submitted to the CoC for review. This provision aims to ensure that the CoC has a clear understanding of the project’s regulatory status, which will help them make informed decisions during the resolution process.
- Ensuring Streamlined Communication and Improved Process Management
Overall, the amendments to the Insolvency and Bankruptcy Code reflect a significant shift towards enhancing communication, transparency, and accountability in the insolvency resolution process. By introducing facilitators for large creditor groups, clarifying the roles of professionals, and ensuring smoother handling of real estate projects, these regulations aim to create a more structured and efficient framework for corporate insolvencies.
