Resolution professionals (RPs) will be required to inform the adjudicating authority about avoidance transactions of a corporate debtor
In order to bring more discipline, transparency, and accountability into the corporate insolvency process, resolution professionals (RPs) will be required to inform the adjudicating authority about avoidance transactions of a corporate debtor, according to the amended Insolvency and Bankruptcy Board of India (IBBI) Regulations, 2016.
“This not only claws back the value lost in such transactions, increasing the possibility of reorganisation of the corporate debtor through a resolution plan, but also disincentivises such transactions, preventing stress to the company,” said the IBBI.
The new regulations for the insolvency resolution process for corporate persons allow the RP to appoint any professional, including registered valuers, to assist him in discharge of his duties during the corporate insolvency resolution process (CIRP).
“Such appointments shall be made at arm’s length, following an objective and transparent process. The invoice for fee shall be raised in the name of the professional and be paid into his bank account,” said the IBBI.
It also required the RPs to disclose all former names and registered office address, changed in the two years preceding the commencement of insolvency, along with the current details.
The IBBI said that the corporate debtor may have changed its name or registered office address prior to commencement of insolvency.
“The stakeholders may find it difficult to relate to the new name or registered office address and consequently fail to participate in the process,” said the IBBI in a statement.
The amendment requires the RP to file Form CIRP 8 on the electronic platform of the board, intimating details of his opinion and determination in respect of avoidance transactions on or before the 140th day of the insolvency commencement date.
Experts said the adherence to these timelines will largely depend on the availability of adequate data and information required for assessment of these transactions.
“In large cases, the personnel, directors, and promoters do not give adequate cooperation for ensuring the availability of the necessary information and data. The process of cooperation and issue of direction by the NCLT is not fast enough to meet the strict timeline prescribed for assessment and determination of avoidance transaction,” said Anoop Rawat, partner, insolvency & bankruptcy at Shardul Amarchand Mangaldas & Co.
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