Status as on: 12/07/2023

Since the inception of the Code, there have been made several changes whenever felt necessary. This article presents the proposed amendments keeping in mind, the issues that are adversely affecting the efficiency and effectiveness of the resolution process and for increasing the possibility of resolution, value of resolution plan, and ending timely resolution.

1. Timeline for providing information for assignment of debt:

Present Law– As per clause (1) of Regulation 28 of IBBI Regulations 2016 (Insolvency Resolution Process for Corporate Persons), if a creditor assigns or transfers the debt to any other person during the resolution process, both parties are required to inform the IRP or RP about the identity of the assignee of the transferee and the terms of such transfer.

Proposed Amendment– If the case may be as above, there has been fixed a timeline to intimate the IRP/RP within seven days from the date of such assignment or transfer.

2. Seeking information from personnel of CD:

Present Law– Regulation 4(2) of CIRP Regulations sets a precedent for CD or any associated person, to provide necessary information and timely communication of such information relating to the necessary assets or records.

Proposed Amendment– To add a new regulation 3A, talking about handing over and taking over assets and records. It mainly mandates-

• To provide a list of all assets and records by the personnel of CD, while handing over the control and custody of such assets and records to IRP or RP.
• If such a list is not prepared by the personnel of CD, such a list shall be prepared by the RP.
• Such a list shall be signed by the present parties and by at least two witnesses of the act of handing over.
• RP shall requisition any assets recorded in the balance sheet or in records referred to in Section 18(1)(f) or the information related to assets referred to in Section 18(1)(a).
• If an application is made by IRP or RP under Section 19(2), it shall be accompanied by the notice of requisition and demonstration of the absence of required assets.

3. Modification of Timeline for Submission of Claims-

Present Law– As per Regulation 12 of CIRP Regulations, a creditor shall submit a claim with proof on or before the last date in public announcement, or within 90 days from the commencement of insolvency.

Proposed Amendment– To reduce the burden of the AA, the following amendments are proposed-

• Extend the timeline for claim submission until 90 days from the commencement of insolvency OR till the date of issue of the latest RFRP, whichever is later. (changes in sub-regulation 2)
• RP shall make a prima facie decision to accept or reject the claims made after the due date. If he accepts, an application for condonation of delay shall be filed on behalf of such creditors and if he rejects, an intimation shall be made to such creditors and hence the rejected creditors can approach the AA for the same. (addition of sub-regulation 2A)
• Such claims categorized as acceptable or non-acceptable shall be submitted in an application presented in two parts- one containing the acceptable claims and another containing claims to be adjudicated by AA (rejected by RP). (addition of sub-regulation 2B)
• Mandating RP to provide reasons for rejecting any claim. (Addition of sub-regulation 2C in Regulation 13).

4. A. Increased duties of AR-

Present Law– An AR has a dual role i.e. ensuring COC fulfills all its obligations and protecting the interests of the FCs he represents.

Proposed Amendment– Regulation 16A of CIRP Regulations may be amended to add the following duties:

(1) helping creditors in understanding the discussions in COC meetings.

(2) to review the contents of minutes prepared by RP to ensure correctness.

(3) to work collaboratively with the creditors to enhance the marketability of assets.

(4) to provide assistance to the creditors in evaluating resolution plans.

(5) to maintain open and frequent communication with RP to give relevant information access to creditors.

(6) to regularly update the progress of CIRP to the creditors.

(7) to represent the creditors in interactions with NCLT, NCLAT, etc.

(8) to assist with the required modifications in the resolution plan.

(9) to record proceedings and prepare minutes of meetings with creditors.

(10) Creditors may propose any other responsibilities upon AR as per their interests and it shall be recorded in the minutes of the COC meeting.

4. B. Increased duties of AR-

Regulation 16A(8) of CIRP Regulations, specifying the fee of AR, has now been exactly doubled. It is as follows-

To attend the COC Meeting

Number of Creditors in the Class	Fee per meeting of the committee in Rs.
10-100	30,000
101-1000	40,000
More than 1000	50,000

Fee for a meeting of creditors in a class-

Number of Creditors in the Class	Fee per meeting of creditors in class in Rs.
10-100	10,000
101-1000	12,000
More than 1000	15,000

 C. Replacement of AR-

Present Law– Presently there’s no express provision for the replacement of AR appointed by AA.

Proposed Amendment– Insertion of the following points in Regulation 16A after sub-regulation (3) has been proposed-

(3A) AR can be replaced by making a request to IRP or RP along with their choice of IP and hence the IRP or RP shall announce a voting window of at least 24 hours and with 10% voting in favor.

(3B) the IRP or RP shall offer a choice of at least three IPs to the FCs including the IP proposed in (3A) and further apply to AA for the same.

5. Inclusion of Relevant minutes in Form H-

Present Law– Regulation 39(4) mandates RP to submit the resolution plan approved by COC to AA along with a compliance certificate in Form H.

Proposed Amendments– Insert a new clause in the Table to include: “Minutes of COC meeting concerning discussion and decisions about resolution plan”.

6. Addressing the aspect of Limitation in an application for initiation of CIRP-

Insertion of a new regulation 2D has been proposed to submit an affidavit, along with the application filed under Section 7 or 9, providing detailed chronology and necessary details of debt and default, and explaining why the application is not barred by the limitation.

7. Favorable Voting on more than one resolution plan-

Regulation 39(3B) shall be substituted with the following points-

• The resolution plan receiving the highest number of votes as per a single transferrable vote (in the form of a ranked-choice ballot) but not less than the requisite votes shall be considered approved.

8. Changes in Timelines-

It is proposed to rectify the typographical error as stated under Regulation 40A-

Section/Regulation	Description of Activity	Present Norm	Present Timeline	Proposed Norm	Proposed Timeline
Regulation 36B	Issue of RFRP, including Evaluation Matrix and IM	Within 5 days of the issue of the provisional list	T+105	Within 5 days of the issue of the provisional list	T+90
	Receipt of Resolution Plans	At least 30 days from the issue of RFRP (Assume 30 days)	T+135	Within 35 days of the issue of the final list of Resolution applicants	T+135

 

9. Audit Requirements for Insolvency Resolution Process Cost (IRPC) in certain CIRPs-

The present CIRP Regulations provide what constitutes IRPC but they do not necessitate an audit of these costs. The following is proposed via sub-regulation (f) under Regulation 31-

• Timing of audit- Wherever the total assets of CD exceed Rs.100 Cr (one hundred crore rupees), the RP shall get the audit of IRPC conducted after the finalization of the cost of IRPC for the financial year.
• Eligibility and disqualification of auditor- Audit shall be conducted by CA who is also an IP w.r.t following conditions-

1. Any CA disqualified under Section 141 of the Companies Act, 2013 from being appointed as an auditor of a company cannot conduct an audit.
2. Any CA involved in the same CIRP as an IP, consultant, advisor, or in any way, cannot conduct an audit.

Conclusion-

The above-stated proposals are open to public comments till 27^th June 2023 and for providing comments for the same, visit the IBBI website- www.ibbi.gov.in

Disclaimer: The above article is based on the personal interpretation of the related orders and laws. The readers are expected to take expert opinions before relying upon the article. For more information, please contact us at ibc@centrik.in.