Introduction: In a significant move, the Insolvency and Bankruptcy Board of India (IBBI) issued amendments to the Insolvency Resolution Process for Personal Guarantors and Bankruptcy Process for Personal Guarantors regulations. The press release, dated 3rd February 2024, outlines key changes aimed at fostering coordination and addressing complexities in personal guarantor cases.

Detailed Analysis: The amendments, effective from 31st January 2023, focus on two crucial aspects. Firstly, the removal of restrictions on the appointment of an insolvency professional (IP) as a resolution professional (RP) or bankruptcy trustee (BT) in personal guarantor cases, even if they have previously acted in corporate insolvency resolution or liquidation processes. This move aims at better harmonization and efficient coordination between corporate and personal insolvency proceedings.

Secondly, the amendment makes the convening of a meeting of creditors mandatory in personal guarantor cases. Unlike the earlier provision, which allowed discretion in calling creditor meetings, the updated regulation emphasizes the necessity of regular meetings, acknowledging the intricate financial interdependencies and multiple creditors involved in personal guarantor cases. This shift towards a more comprehensive approach enhances the fairness and effectiveness of the resolution process.

The amendments intend to encourage active participation and cooperation among all stakeholders, ensuring a robust and equitable framework for addressing financial distress in personal guarantor cases. The IBBI emphasizes the need for a thorough approach to navigate the complexities inherent in these cases, aligning with the broader goal of the insolvency and bankruptcy framework.

Conclusion: The Insolvency and Bankruptcy Board of India’s recent amendments signify a proactive step toward refining the regulations governing personal guarantors to corporate debtors. The removal of restrictions on IP appointments and the mandatory convening of creditor meetings demonstrate a commitment to addressing complexities and fostering a more collaborative and effective resolution process. These changes mark a positive stride in creating a comprehensive framework that aligns with the evolving landscape of insolvency and bankruptcy proceedings. Stakeholders are encouraged to review the amended regulations, effective from 31st January 2023, available on the IBBI website.

Insolvency and Bankruptcy Board of India

No. IBBI/PR/2024/05
3rd February, 2024

Press Release

Insolvency and Bankruptcy Board of India amends the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Personal Guarantors to Corporate Debtors) Regulations, 2019 and Insolvency and Bankruptcy Board of India (Bankruptcy Process for Personal Guarantors to Corporate Debtors) Regulations, 2019

The Insolvency and Bankruptcy Board of India (IBBI) notified theInsolvency and Bankruptcy Board of India (Insolvency Resolution Process for Personal Guarantors to Corporate Debtors) (Amendment) Regulations, 2024 and Insolvency and Bankruptcy Board of India (Bankruptcy Process for Personal Guarantors to Corporate Debtors) (Amendment) Regulations, 2024 on 31st January, 2024.

2. The amendment removes the restrictions on an insolvency professional (IP) to be appointed as resolution professional (RP) or bankruptcy trustee (BT) in the insolvency resolution process or bankruptcy process of personal guarantors (PGs) to corporate debtors (CDs) respectively, if she has acted or is acting as interim resolution professional, RP or liquidator during the corporate insolvency resolution process (CIRP) or liquidation process of the CD. Removal of this restriction will allow the appointment of same IP in both the corporate process as well as the insolvency and bankruptcy proceeding of the PGs to the CDs for better harmonization and effective coordination of both the processes.

3. The PG submits a repayment plan to the RP, who then evaluates its viability and submits a report to the Adjudicating Authority with a recommendation on whether to call a meeting of the creditors. If the RP deems such a meeting unnecessary, he provides reasons for the same. As this provision was initially designed for speedier resolution in less complex cases, there was no mandatory requirement to regularly convene meeting of the creditors. However, the intricacies of PG cases, which often involve elaborate financial interdependencies and multiple creditors, necessitate a more thorough approach. To address complexities and unique challenges inherent in the PG cases, the amendment aims to make the convening of meeting of creditors mandatory. This mandatory involvement of creditors brings a comprehensive and collaborative approach to the resolution process, enhancing the efficacy and fairness of the system. The amendment intends to foster active participation and cooperation among all stakeholders, thereby reinforcing a robust and equitable framework for addressing financial distress in PG cases.

4. The amended regulations are effective from 31st January, 2023 and are available at www.ibbi.gov.in.

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