IBBI amends the (Insolvency Professionals Regulations, Insolvency Professional Agencies Regulations, (Insolvency Resolution Process for Corporate Persons & Liquidation Process Regulations.
Insolvency Professionals Regulations:
(a) An insolvency professional shall not accept or undertake any assignment as interim resolution professional, resolution professional, liquidator, bankruptcy trustee, authorised representative or in any other role under the Insolvency and bankruptcy Code, 2016 unless he holds an ‘Authorisation for Assignment’ issued by his Insolvency Professional Agency. This is effective from 1st January, 2020.
(b) An insolvency professional shall not engage in any employment when he holds an Authorisation for Assignment or when he is undertaking an assignment. This would enable an individual to seek registration as an insolvency professional even when he is in employment. He must, however, discontinue employment when he wishes to have an Authorisation for Assignment. He may surrender Authorisation for Assignment when he wishes to take up employment.
(c) Where an insolvency professional has conducted a corporate insolvency resolution process, he and his relatives shall not accept any employment, other than an employment secured through open competitive recruitment, with, or render professional services, other than services under the Code to a creditor having more than ten percent voting power, the successful resolution applicant, the corporate debtor or any of their related parties, until a period of one year has elapsed from the date of his cessation from such process.
(d) An insolvency professional shall not engage or appoint any of his relatives or related parties, for or in connection with any work relating to any of his assignment.
Insolvency Professional Agencies Regulations:
(a) An Insolvency Professional Agency shall issue/renew an Authorisation for Assignment to insolvency professionals in accordance with its Bye-laws.
(b) Subject to meeting other requirements, an insolvency professional shall be eligible to obtain an Authorisation of Assignment if he has not attained the age of seventy years.
(c) Subject to meeting other requirements, an individual may serve as an independent director on the Governing Board of an Insolvency Professional Agency up to the age of seventy-five years.
(a) The amendments specify the process for withdrawal of applications before constitution of committee of creditors (CoC), after constitution of CoC but before issue of invitation for expression of interest, and after issue of invitation for expression of interest.
(b) The amendments require that while approving a resolution plan or deciding to liquidate the corporate debtor, the CoC may:
(i) approve a plan providing for contribution for meeting the liquidation costs,
(ii) recommend sale of the corporate debtor or sale of business of the corporate debtor as a going concern, and
(iii) fix, in consultation with the RP, the fee payable to the liquidator, if an order for liquidation is passed by the Adjudicating Authority.
Liquidation Process Regulations:
(i) The amendments specify the process for
(a) sale of corporate debtor as going concern, and
(b) sale of business of corporate debtor as going concern under liquidation. These also provide that where a corporate debtor is sold as a going concern, the liquidation process shall be closed without dissolution of the corporate debtor.
(ii) The amendments require completion of liquidation process within one year of its commencement, notwithstanding pendency of applications for avoidance transactions. These provide a model timeline for each task in the liquidation process. It also specifies a maximum time of 90 days from the order of liquidation for completion of compromise or arrangement, if any, proposed by the stakeholders under section 230 of the Companies Act, 2013. These will ensure that liquidation process is closed at the earliest.
(iii) The amendments require the financial creditors, who are financial institutions, to contribute towards the liquidation cost, where the corporate debtor does not have adequate liquid resources to complete liquidation, in proportion to the financial debts owed to them by the corporate debtor, in case the CoC did not approve a plan for such contribution during corporate insolvency resolution process. However, such contribution along with interest at bank rate thereon shall form part of liquidation cost, which is paid in priority.
(iv) The amendments provide for constitution of a Stakeholders’ Consultation Committee having representation from secured financial creditors, unsecured financial creditors, workmen and employees, government, other operational creditors, and shareholder/partners to advice the liquidator on matters relating to sale. However, the advice of this committee is not binding on the liquidator.
(v) The amendmentsrequire that a stakeholder may submit its claim or update its claim submitted during the corporate insolvency resolution process, as on the liquidation commencement date.
Along with submission of claim, a secured creditor shall inform the liquidator of its decision to relinquish its security interest to liquidation estate or to realise its security interest.
(vi) The amendments have introduced a comprehensive compliance certificate to be submitted along with the final report to the Adjudicating Authority.