Introduction: The Insolvency and Bankruptcy Board of India (IBBI) has issued a significant notification on the 15th of February, 2024, introducing amendments to the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016. These amendments, labeled as the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) (Amendment) Regulations, 2024, bring about crucial changes aimed at enhancing the efficiency and transparency of the corporate insolvency resolution process.
Detailed Analysis:
1. Separate Bank Account for Real Estate Projects (Regulation 4D): The amendments now mandate the operation of a separate bank account for each real estate project by the interim resolution professional or resolution professional, ensuring a focused financial approach for such projects.
2. Committee Meeting Protocols (Regulation 18): The regulation introduces a revised timeframe for convening committee meetings, emphasizing a meeting before the lapse of thirty days from the last meeting. The committee may extend the interval between meetings, provided there is at least one meeting in each quarter.
3. Electronic Voting System (Regulation 25): The electronic voting system is now emphasized for members who did not vote at the meeting, allowing flexibility in voting duration. Extensions may be granted on creditor requests, but not beyond the receipt of the requisite majority vote.
4. Approval of Committee for Costs (New Regulation 31B): A new regulation mandates the approval of the committee for insolvency resolution process costs, ensuring transparency and accountability in financial matters related to the corporate debtor.
5. Valuation Methodology Explanation (Regulation 35): A proviso requires the resolution professional to facilitate a meeting wherein registered valuers explain the valuation methodology to the committee members before computation of estimates.
6. Fair Value Disclosure (Regulation 36): The committee may decide not to disclose the fair value if considered beneficial for the resolution process, introducing a level of flexibility in information sharing.
7. Resolution Plan for Real Estate Projects (New Regulation 36A): After committee approval, the resolution professional may invite a resolution plan for each real estate project or group of projects of the corporate debtor, providing specificity in the resolution process.
8. Monitoring Committee (New Sub-Regulations in Regulation 38): The committee may consider the need for a monitoring committee for resolution plan implementation. If required, it may include the resolution professional or propose another insolvency professional or person, with restrictions on the resolution professional’s monthly fee.
9. Resolution Professional Responsibilities (Clarification in Regulation 40): A clarification ensures that the resolution professional continues discharging responsibilities under the corporate insolvency resolution process until the application for extension is decided by the Adjudicating Authority.
Conclusion: The amendments introduced by the Insolvency and Bankruptcy Board of India reflect a commitment to refining and strengthening the corporate insolvency resolution process. These changes aim to enhance transparency, accountability, and efficiency, addressing specific aspects such as separate bank accounts for real estate projects, committee meeting protocols, electronic voting systems, and the role of monitoring committees. The overall objective is to facilitate a smoother and more effective resolution process for corporate entities undergoing insolvency, contributing to the stability and reliability of the insolvency framework in India.
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INSOLVENCY AND BANKRUPTCY BOARD OF INDIA
NOTIFICATION
New Delhi, the 15th February, 2024
Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons)
(Amendment) Regulations, 2024
No. IBBI/2023-24/GN/REG 113.In exercise of the powers conferred by clause (t) of sub-section (1) of section 196 read with section 240 of the Insolvency and Bankruptcy Code, 2016 (31 of 2016), the Insolvency and Bankruptcy Board of India hereby makes the following regulations to further amend the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016, namely:-
1. (1) These regulations may be called the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) (Amendment) Regulations, 2024.
(2) They shall come into force on the date of their publication in the Official Gazette.
2. In the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 (hereinafter referred to as “the principal regulations”), after regulation 4C, the following regulation shall be inserted, namely: –
“4D. Operating separate bank account for each real estate project.
Where the corporate debtor has any real estate project, the interim resolution professional or the resolution professional, as the case may be, shall operate a separate bank account for each real estate project.”
3. In the principal regulations, in regulation 18, for sub-regulation (1), the following sub-regulation shall be substituted, namely: –
“(1) A resolution professional shall convene a meeting of the committee before lapse of thirty days from the last meeting:
Provided that the committee may decide to extend the interval between such meetings subject to the condition that there shall be at least one meeting in each quarter.”
4. In the principal regulations, in regulation 25, in sub-regulation (5), for clause (b), the following shall be substituted, namely: –
“b) seek a vote of the members who did not vote at the meeting on the matters listed for voting, by electronic voting system in accordance with regulation 26 where the voting shall be kept open, from the circulation of the minutes, for such time as decided by the committee which shall not be less than twenty-four hours and shall not exceed seven days:
Provided that on a request for extension made by a creditor, the voting window shall be extended in increments of twenty-four hours period:
Provided further that the resolution professional shall not extend the voting window where the matters listed for voting have already received the requisite majority vote and one extension has been given after the receipt of requisite majority vote.”
5. In the principal regulations, after regulation 3 1A, the following regulation shall be inserted, namely: –
“Approval of committee for insolvency resolution process costs.
The insolvency professional shall place in each meeting of the committee, the operational status of the corporate debtor and shall seek its approval for all costs, which are part of insolvency resolution process costs.”
6. In the principal regulations, in regulation 35, in sub-regulation (1), after clause (a), the following proviso shall be inserted, namely: –
“Provided that the resolution professional shall facilitate a meeting wherein registered valuers shall explain the methodology being adopted to arrive at valuation to the members of the committee before computation of estimates.”
7. In the principal regulations, in regulation 35, for sub-regulation (2), the following shall be substituted, namely: –
“(2) After the receipt of resolution plans in accordance with the Code and these regulations, the resolution professional shall provide the fair value, the liquidation value and valuation reports to every member of the committee in electronic form, on receiving an undertaking from the member to the effect that such member shall maintain confidentiality of the fair value, the liquidation value and valuation reports and shall not use the information contained in the valuation reports to cause an undue gain or undue loss to itself or any other person and comply with the requirements under sub-section (2) of section 29.”
8. In the principal regulations, in regulation 36, in sub-regulation (2), after clause (k), the following clause shall be inserted, namely: –
“(ka) fair value:
Provided that the committee may decide not to disclose the fair value if, for reasons to be recorded in writing, it considers such non-non-disclosure to be beneficial for the resolution process.”
9. In the principal regulations, in regulation 36A, after sub-regulation (1), the following clarification shall be inserted, namely: –
“Clarification: The resolution professional after the approval of the committee may invite a resolution plan for each real estate project or group of projects of the corporate debtor.”
10. In the principal regulations, after sub-regulation (3) of regulation 38, the following sub-regulations shall be inserted, namely: –
“(4) The committee may consider the requirement of a monitoring committee for the implementation of the resolution plan.
(5) Where the committee considers that a monitoring committee for the implementation of the resolution plan is required, it may, while approving the resolution plan, decide to constitute the same with the resolution professional or propose another insolvency professional, or any other person as its members:
Provided that where the resolution professional is proposed to be part of the monitoring committee, the monthly fee payable to him shall not exceed the monthly fee received by him during the corporate insolvency resolution process.”
11. In the principal regulations, in regulation 40, after sub-regulation (2), the following clarification shall be inserted, namely: –
“Clarification: It is clarified that the resolution professional shall continue to discharge his responsibilities under the corporate insolvency resolution process, till the application for extension is decided by the Adjudicating Authority.”
RAVI MITAL, Chairperson
[ADVT.-III/4/Exty./753/2023-24]
Note: The Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 were published vide Notification No. IBBI/2016- 17/GN/REG004, dated 30th November, 2016 in the Gazette of India, Extraordinary, Part III, Section 4, No. 432 on 30th November, 2016 and were last amended by the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) (Second Amendment) Regulations, 2023 published vide notification No. IBBI/2023-24/GN/REG1 06, dated the 18th September, 2023 in the Gazette of India, Extraordinary, Part III, Section 4, No. 645 on 18th September, 2023.
