The Insolvency and Bankruptcy Board of India (“IBBI”) has amended the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016, and IBBI (Fast Track Insolvency Resolution Process for Corporate Persons) Regulations, 2017 vide its amendments effective from 31 December 2017 (available here and here), to provide for key changes like amendment of the definition of dissenting financial creditors, timing of sharing of liquidation value of the corporate debtor with creditors and resolution applicants, maintaining confidentiality of the liquidation value of the corporate debtor and expedited submission of the resolution plan.
The amendments are as follows:
- Change in the definition of ‘dissenting financial creditor’. As per the amendments, even those financial creditors who will abstain from the voting on resolution plan, will be considered as dissenting financial creditor. Earlier, only those who voted against the resolution plan were considered as dissenting financial creditor. The move is aimed to ensure identification of specific source of funds for liquidation value due to dissenting financial creditors (including those who abstained from voting) so that such payment is made before any recoveries are made by the financial creditors who voted in favour of the resolution plan.
- Timing of disclosure of liquidation value to the creditors and undertaking from the creditors. Before the amendments, the liquidation value of the corporate debtor was required to be disclosed as part of the information memorandum which is to be shared with resolution applicants and was also required to be disclosed to the creditors. These requirements have been done away with.
Now, the liquidation value is required to be shared with every member of the committee in electronic form after the receipt of resolution plans, on receiving an undertaking from the member to the effect that such member shall:
- maintain confidentiality of the liquidation value; and
- not use such value to cause an undue gain or undue loss to itself or any other person; and
- comply with the requirements under section 29(2) of the Insolvency and Bankruptcy Code, 2016 (“Code”), that is, (a) to comply with provisions of law for the time being in force relating to confidentiality and insider trading; (b) to protect any intellectual property of the corporate debtor it may have access to; and (c) not to share relevant information with third parties aforementioned two conditions in (a) and (b) are complied with.
- Confidentiality obligations of the resolution professional. The amendments have also provided that the interim resolution professional or the resolution professional, as the case may be, is also required to comply with the confidentiality obligations vis-à-vis liquidation value of the corporate debtor.
- Expedited submission of the resolution plan. The amendments have provided that a resolution applicant is required to submit resolution plan(s) prepared in accordance with the Code to the resolution professional within the time given in the invitation made under the Code by the resolution professional wherein he makes an invitation to resolution applicants to submit the resolution plans.
Earlier the position was that a resolution applicant had to endeavour to submit a resolution plan prepared in accordance with the Code to the resolution professional, thirty (30) days before expiry of the maximum period permitted for the completion of the corporate insolvency resolution process.
The move is aimed to enable the committee of creditors to close a resolution process as early as possible.
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