The Insolvency and Bankruptcy Board of India (IBBI) on July 4, 2018 notified the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) (Third Amendment) Regulations, 2018.
The IBBI notified revised norms for insolvency resolution process paving the way for home buyers to seek relief as financial creditors, detailing clear timelines to be followed by resolution professionals and permitting withdrawal of insolvency applications, subject to certain conditions.
Amendments to the regulations:
Corporate debtor with classes of creditors
In case the corporate debtor has classes of creditors, having at least ten creditors, the interim resolution professional shall offer a choice of three insolvency professionals in the public announcement to act as the authorised representative of creditors in each class.
The insolvency professional, who is the choice of the highest number of creditors in the class, shall be appointed as the authorised representative of the creditors of the respective class.
Withdrawal of an application
An withdrawal application for closure of corporate insolvency resolution process need to be submitted to the resolution professional before issue of invitation along with a bank guarantee towards estimated cost incurred for certain purposes under the process.
The committee of creditors (CoC) shall consider the application within seven days of its constitution or seven days of receipt of the application, whichever is later. Once the application is approved by the CoC with 90 percent voting share, it is then required to be submitted to the Adjudicating Authority within three days of approval.
No agreement for rate of interest
If the rate of interest has not been agreed between the parties in case of creditors in a class, the voting share of such a creditor shall be in proportion to the financial debt with interest rate of 8 percent per annum.
Delay in appointment of resolution professional
If the appointment of resolution professional is delayed, the interim resolution professional needs to perform the functions of the resolution professional from the 40th day of the insolvency commencement till a resolution professional is appointed.
Meeting of Committee of Creditors
Each participant of the CoC shall be called for the meeting through written means, giving minimum five days’ notice in advance. However, the CoC may reduce the notice period from five days to period of not less than 48 hours, if there is any authorised representative and to 24 hours in all other cases.
Resolution professional to determine corporate debtor’s case
The resolution professional needs to form an opinion whether the corporate debtor has been subjected to undervalued transactions, extortionate transactions or fraudulent transactions by 75th day of the insolvency and shall determine the same by 115th day. This information need to be circulated to the Adjudicating Authority for appropriate relief before 135th day.
The resolution professional needs to publish an invitation for Expression of Interest (EoI) by the 75th day from the insolvency commencement date and the resolution professionals have to publish a provisional list of prospective applicants within 10 days from the EoI submission deadline.
Resolution professional to issue information memorandum, the evaluation matrix and RFRP
The resolution professional shall issue the information memorandum, the evaluation matrix and the request for resolution plans (RFRP), within five days of issue of the provisional list to the prospective resolution applicants and allow at least 30 days for submission of resolution plans.
With the amended norms, there is more clarity on procedural requirements for various classes of creditors, including home buyers.
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