IBBI amends regulations for more transparency and accountability

Resolution professionals (RPs) will be required to inform the adjudicating authority about avoidance transactions of a corporate debtor

Topics

IBBI | Insolvency and Bankruptcy Code | Bankruptcy laws

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.

Dear Reader,


Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.


We, however, have a request.

As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.

Support quality journalism and subscribe to Business Standard.

Digital Editor