New system of voting on more than one resolution plans, extending the timeline for submission of claims, and introducing audit for insolvency resolution process cost in some cases are among a series of changes the Insolvency and Bankruptcy Board of India (IBBI) has proposed to the existing insolvency regulations under IBC.
To ensure that preference of plan is captured, and creditors are able to vote freely, it is proposed to use a system of voting with preference, the insolvency regulator said in a discussion paper published on Wednesday.
This means if no plan achieves the 66 per cent required votes, the proposal with least first preference votes is eliminated and its first preference is allotted to the second highest voted plan, the paper stated.
The IBBI has proposed that wherever the total assets of the corporate debtor as per the last available financial statements exceed Rs 100 crore, the resolution professional will get the audit of insolvency resolution process cost conducted after finalisation of the cost of the IRPC for the financial year.
While bringing out the discussion paper, the IBBI said there were two major criticisms against the resolution process under the Code. First, that fewer companies were being resolved with lesser value realisation and the time taken for such resolution is longer than what the law prescribes. “This paper analyses resolution processes that have been completed and are ongoing, presents the understanding of issues that are adversely affecting the efficiency and effectiveness of the resolution process,” the IBBI said.
The proposed regulations also seek to make it compulsory for the resolution professional to provide reasons for the rejection of any claim to ensure transparency of the process and provide clarity to creditors whose claims have been rejected, while allowing creditors to submit claims beyond the 90-day limit without approaching the adjudicating authority.
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While the move will give enhanced flexibility to creditors and reduce burden on the NCLTs, the IBBI has cautioned that it could add to delays and increase the responsibility of the resolution professional.
The IBBI has proposed that promoters or any other person associated with the management of the corporate debtor should hand over the assets as per the balance sheet of the company. If this is not available, then a list of assets being handed over to the resolution professional has to prepared.
The IBBI has also proposed that the application process should have the creditor submit an affidavit, detailing the chronology of the debt and default, and explaining why the application is not barred by limitation.
In a move that could help the homebuyers, the authorised representative of the financial creditors is also proposed to be given more responsibility, such as helping the resolution professional to increase the marketability of the assets of the corporate debtor and also assist in modification of resolution plan as desired by the members of CoC.
The IBBI has also proposed to increase the fee of the authorised representative to be commensurate with the increased duties to double the current levels.
The relevant minutes of the CoC meetings, the IBBI has said, should also be included in the existing Form H, which deals with the details of the CIRP.