Insolvency and Bankruptcy Code Amendment Bill passed

Amendments to (i) the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016, and (ii) the Insolvency and Bankruptcy Board of India (Fast Track Insolvency Resolution Process for Corporate Persons) Regulations, 2017

The Insolvency and Bankruptcy Board of India (IBBI) has amended (i) the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016, and (ii) the Insolvency and Bankruptcy Board of India (Fast Track Insolvency Resolution Process for Corporate Persons) Regulations, 2017 on 31stDecember, 2017.

According to the Regulations, a Resolution Plan needs to identify specific sources of funds to be used for paying the liquidation value due to dissenting creditors. For this purpose, the ‘Dissenting Financial Creditor’, according to amended Regulations, means a financial creditor who voted against the Resolution Plan or abstained from voting for the Resolution Plan, approved by the Committee of Creditors.

As per the Amendments, it is not necessary to disclose ‘liquidation value’ in the Information Memorandum. After the receipt of Resolution Plan(s) in accordance with the Insolvency and Bankruptcy Code, 2016 (Code) and the Regulations, the Resolution Professional shall provide the liquidation value to every member of the Committee of Creditors after obtaining an undertaking from the member to the effect that such member shall maintain confidentiality of the liquidation value and shall not use such value to cause an undue gain or undue loss to itself or any other person. Also, the Interim Resolution Professional or the Resolution Professional, as the case may be, shall maintain confidentiality of the liquidation value.

According to the Amendments, a Resolution Applicant shall submit the resolution plan(s) to the resolution professional within the time given in the invitation for the Resolution Plans in accordance with the provisions of the Code. This will enable the Committee of Creditors to close a resolution process as early as possible subject to provisions in the Code and the Regulations.

The Amendments have come into force from today on their publication in the Gazette of India. The Amendments are available at www.mca.gov.in and www.ibbi.gov.in.

-02 JANUARY, 2018

Insolvency and Bankruptcy Code Amendment Bill passed

The Rajya Sabha on January 02, 2018 passed the Insolvency and Bankruptcy Code (Amendment) Bill, 2017, which bars unscrupulous persons from misusing the provisions of the Code. The Bill, which replaces an ordinance promulgated in November, 2017 was cleared by the Lok Sabha last week.

Concurring with Congress leader Jairam Ramesh, Finance Minister Arun Jaitley said it was only in recent years that the government had chartered into the bankruptcy and insolvency area. “Therefore, for all of us, it is a learning experience. We encounter situations that we had not anticipated earlier, and as we move further, we will certainly require evolution as far as our laws and procedures are concerned,” he said.

The Bill, which replaces an ordinance promulgated last November, was cleared by the Lok Sabha last week.

Addressing another issue flagged by Opposition members, including Mr. Ramesh, about the Code’s application vis-à-vis Micro, Small, and Medium Enterprises (MSME), Mr. Jaitley said Insolvency Legal Committee was examining if separate regulations were required for the sector.

Another major concern was the huge “haircut [loss on account of auction of assets of defaulting companies],” to the extent of 75%, being taken by public sector creditors. To this, Mr. Arun Jaitley said it was for the creditors to decide how much haircut they wanted to settle for.

Arun Jaitley said Insolvency Legal Committee was examining if separate regulations were required for the sector.

Initiating the debate, former Finance Minister P. Chidambaram said there were flaws in several clauses. “One should have kept exclusion to a very, very small number, which definitely must be excluded. By making clauses so broad, so over-inclusive, practically everybody in the financial world is likely to be excluded.”

NEW DELHI, JANUARY 02, 2018