IBBI proposes streamlining insolvency process

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A discussion paper on amendments to the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Process) Regulations, issued on 1 November, aims to improve the efficiency of executing resolution plans.

The Insolvency and Bankruptcy Board of India (IBBI) has suggested bifurcating resolution plans. Part A should focus on the financial aspects, including the total value, payment timelines, feasibility assessment and resolution process costs. Part B must address the distribution of funds among creditors and stakeholders.

The proposals necessitate insolvency professionals seeking approval for expenses incurred during the resolution process. This encompasses operational costs sustained to maintain business operations throughout the process.

The IBBI recommends mandatory monthly meetings for the committees of creditors (CoCs). A suggested alteration empowers resolution professionals to convene meetings whenever necessary, ensuring intervals between meetings do not exceed 30 days.

Another suggestion entails valuers explaining their methodology before finalising their valuation reports. This explanation is to be provided to the CoC during a meeting organised by the resolution professional.

In addition, the IBBI proposes incorporating fair value as a component of information memorandums. To ensure smooth continuity of the resolution process, the IBBI seeks clarity on procedural conduct during pending extension application verdicts from an adjudicating authority. This ensures resolution professionals can discharge their duties effectively.

The proposed amendments outline the entitlement for creditors disagreeing with the resolution plan, ensuring they receive an amount lower than two specified options based on liquidation or the execution of a resolution plan. Public comment closed on 22 November 2023.

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