{"id":12166,"date":"2021-07-22T00:00:00","date_gmt":"2021-07-22T00:00:00","guid":{"rendered":"https:\/\/www.nextias.com\/current_affairs\/uncategorized\/22-07-2021\/amendment-in-ibbi-regulations-2016\/"},"modified":"2021-07-22T00:00:00","modified_gmt":"2021-07-22T00:00:00","slug":"amendment-in-ibbi-regulations-2016","status":"publish","type":"post","link":"https:\/\/www.nextias.com\/ca\/current-affairs\/22-07-2021\/amendment-in-ibbi-regulations-2016","title":{"rendered":"Amendment in IBBI Regulations 2016"},"content":{"rendered":"<p><span style=\"font-size:11pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"><strong><u>In News<\/u><\/strong><\/span><\/span><\/span><\/p>\n<p><span style=\"font-size:11pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\">Recently, the Insolvency and Bankruptcy Board of India (IBBI) has amended the <\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"><strong>Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016.<\/strong><\/span><\/span><\/span><\/p>\n<p><span style=\"font-size:11pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"><strong><u>About<\/u><\/strong><\/span><\/span><\/span><\/p>\n<ul>\n<li style=\"list-style-type:disc\"><span style=\"font-size:11pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\">The amendments were aimed at <\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"><strong>enhancing the discipline, transparency, and accountability<\/strong><\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"> in corporate insolvency proceedings.<\/span><\/span><\/span><\/li>\n<li style=\"list-style-type:disc\"><span style=\"font-size:11pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\">In March 2021 a sub-committee of the Insolvency Law Committee (ILC) recommended a pre-pack framework within the basic structure of the I<\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"><strong>nsolvency and Bankruptcy Code (IBC), 2016.<\/strong><\/span><\/span><\/span><\/li>\n<\/ul>\n<p><span style=\"font-size:11pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"><strong><u>Key Amendments<\/u><\/strong><\/span><\/span><\/span><\/p>\n<ul>\n<li style=\"list-style-type:disc\"><span style=\"font-size:11pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\">The new regulations for the insolvency resolution process for corporate persons allow the <\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"><strong>RP to appoint any professional<\/strong><\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\">, including registered valuers, to assist him in the discharge of his duties during the <\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"><strong>corporate insolvency resolution process (CIRP)<\/strong><\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\">.<\/span><\/span><\/span><\/li>\n<li style=\"list-style-type:disc\"><span style=\"font-size:11pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\">Such appointments shall be made at <\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"><strong>arm\u2019s length<\/strong><\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\">, following an objective and transparent process. The invoice for the fee shall be raised in the name of the professional and be paid into his bank account.<\/span><\/span><\/span>\n<ul>\n<li style=\"list-style-type:circle\"><span style=\"font-size:11pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"><strong>CIRP includes necessary steps<\/strong><\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"> to revive the company such as raising fresh funds for operation, looking for a new buyer to sell the company as a going concern, etc.<\/span><\/span><\/span><\/li>\n<\/ul>\n<\/li>\n<li style=\"list-style-type:disc\"><span style=\"font-size:11pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\">The <\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"><strong>Resolution professionals (RPs)<\/strong><\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"> will be required to inform the adjudicating authority about avoidance transactions of a corporate debtor.<\/span><\/span><\/span>\n<ul>\n<li style=\"list-style-type:circle\"><span style=\"font-size:11pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\">RPs has to disclose all former names and registered office addresses changed in the two years preceding the commencement of insolvency, along with the current details.<\/span><\/span><\/span><\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<p><span style=\"font-size:11pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"><strong><u>Significance<\/u><\/strong><\/span><\/span><\/span><\/p>\n<ul>\n<li style=\"list-style-type:disc\"><span style=\"font-size:11pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\">It would allow stakeholders to claw back lost value and would disincentive stakeholders from entering into such transactions.<\/span><\/span><\/span><\/li>\n<\/ul>\n<p><span style=\"font-size:11pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"><strong><u>Concerns<\/u><\/strong><\/span><\/span><\/span><\/p>\n<ul>\n<li style=\"list-style-type:disc\"><span style=\"font-size:11pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\">The adherence to these timelines will largely depend on the availability of adequate data and information required for the assessment of these transactions.<\/span><\/span><\/span><\/li>\n<li style=\"list-style-type:disc\"><span style=\"font-size:11pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\">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 the assessment and determination of avoidance transactions.<\/span><\/span><\/span><\/li>\n<\/ul>\n<p><span style=\"font-size:11pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"><strong><u>Insolvency and Bankruptcy Code (IBC) 2016<\/u><\/strong><\/span><\/span><\/span><\/p>\n<ul>\n<li style=\"list-style-type:disc\"><span style=\"font-size:11pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"><strong>Aim:<\/strong><\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"> It provides for a time-bound process to resolve insolvency and is applicable to companies, partnerships and individuals.<\/span><\/span><\/span>\n<ul>\n<li style=\"list-style-type:circle\"><span style=\"font-size:11pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\">When a default in repayment occurs, creditors gain control over the debtor\u2019s assets and must make decisions to resolve insolvency.<\/span><\/span><\/span><\/li>\n<li style=\"list-style-type:circle\"><span style=\"font-size:11pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\">Both debtor and creditor can start &#8216;recovery&#8217; proceedings against each other.<\/span><\/span><\/span><\/li>\n<\/ul>\n<\/li>\n<li style=\"list-style-type:disc\"><span style=\"font-size:11pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"><strong>Timeframe:<\/strong><\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"> It prescribes a maximum period of 330 days for a resolution as per an amendment introduced in 2019.<\/span><\/span><\/span><\/li>\n<\/ul>\n<p><span style=\"font-size:11pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"><strong>Key components of IBC in resolution process:<\/strong><\/span><\/span><\/span><\/p>\n<ul>\n<li style=\"list-style-type:disc\"><span style=\"font-size:11pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"><strong>Insolvency Professionals: <\/strong><\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\">These administer the resolution process, manage the assets of the debtor, and provide information for creditors to assist them in decision making.<\/span><\/span><\/span><\/li>\n<li style=\"list-style-type:disc\"><span style=\"font-size:11pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"><strong>Insolvency Professional Agencies: <\/strong><\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\">These conduct examinations to certify the insolvency professionals and enforce a code of conduct for their performance.<\/span><\/span><\/span><\/li>\n<li style=\"list-style-type:disc\"><span style=\"font-size:11pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"><strong>Information Utilities: <\/strong><\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\">Creditors report financial information of the debt owed to them by the debtor. Such information includes records of debt, liabilities and defaults.<\/span><\/span><\/span><\/li>\n<li style=\"list-style-type:disc\"><span style=\"font-size:11pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"><strong>Adjudicating authority:<\/strong><\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"> The proceedings of the resolution process is adjudicated by:<\/span><\/span><\/span>\n<ul>\n<li style=\"list-style-type:circle\"><span style=\"font-size:11pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"><strong>National Companies Law Tribunal (NCLT) <\/strong><\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\">for companies and limited liability partnerships.<\/span><\/span><\/span><\/li>\n<li style=\"list-style-type:circle\"><span style=\"font-size:11pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"><strong>Debt Recovery Tribunal (DRT) <\/strong><\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\">for individuals.<\/span><\/span><\/span><\/li>\n<\/ul>\n<\/li>\n<li style=\"list-style-type:disc\"><span style=\"font-size:11pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"><strong>Insolvency and Bankruptcy Board:<\/strong><\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"> It regulates insolvency professionals, insolvency professional agencies and information utilities set up under the Code.<\/span><\/span><\/span><\/li>\n<li style=\"list-style-type:disc\"><span style=\"font-size:11pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\">It consists of representatives of the Reserve Bank of India, and the Ministries of Finance, Corporate Affairs and Law.<\/span><\/span><\/span><\/li>\n<li style=\"list-style-type:disc\"><span style=\"font-size:11pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"><strong>Committee of creditors (COC):<\/strong><\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"> It consists of the financial creditors who lent money to the debtor.<\/span><\/span><\/span>\n<ul>\n<li style=\"list-style-type:circle\"><span style=\"font-size:11pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\">It decides the future of the outstanding debt owed to them.<\/span><\/span><\/span><\/li>\n<li style=\"list-style-type:circle\"><span style=\"font-size:11pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\">They may choose to revive the debt owed to them by changing the repayment schedule or selling the assets of the debtor to get their dues back.<\/span><\/span><\/span><\/li>\n<li style=\"list-style-type:circle\"><span style=\"font-size:11pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\">If a decision is not taken in 180 days, the debtor\u2019s assets go into liquidation.<\/span><\/span><\/span><\/li>\n<li style=\"list-style-type:circle\"><span style=\"font-size:11pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\">The minimum vote required to approve the resolution plan is 75% in a meeting of COC.<\/span><\/span><\/span><\/li>\n<\/ul>\n<\/li>\n<li style=\"list-style-type:disc\"><span style=\"font-size:11pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"><strong>Order of proceeds from sale:<\/strong><\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"> If a company goes under liquidation, Proceeds from the sale of the debtor\u2019s assets are distributed in the following order.<\/span><\/span><\/span>\n<ul>\n<li style=\"list-style-type:circle\"><span style=\"font-size:11pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"><strong>First<\/strong><\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\">: Insolvency resolution costs, including the remuneration to the insolvency professional,<\/span><\/span><\/span><\/li>\n<li style=\"list-style-type:circle\"><span style=\"font-size:11pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"><strong>Second:<\/strong><\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"> Secured creditors, whose loans are backed by collateral<\/span><\/span><\/span><\/li>\n<li style=\"list-style-type:circle\"><span style=\"font-size:11pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"><strong>Third:<\/strong><\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"> Dues to workers, other employees,<\/span><\/span><\/span><\/li>\n<li style=\"list-style-type:circle\"><span style=\"font-size:11pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"><strong>Fourth:<\/strong><\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"> Unsecured creditors.<\/span><\/span><\/span><\/li>\n<\/ul>\n<\/li>\n<li style=\"list-style-type:disc\"><span style=\"font-size:11pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"><strong>Insolvency is a situation<\/strong><\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"> where individuals or companies are unable to repay their outstanding debt.<\/span><\/span><\/span><\/li>\n<li style=\"list-style-type:disc\"><span style=\"font-size:11pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"><strong>Bankruptcy is a situation<\/strong><\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"> whereby a court of competent jurisdiction has declared a person or other entity insolvent, having passed appropriate orders to resolve it and protect the rights of the creditors.\u00a0<\/span><\/span><\/span><\/li>\n<\/ul>\n<p><span style=\"font-size:11pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\">Source: <\/span><\/span><\/span><a href=\"https:\/\/indianexpress.com\/article\/business\/ibbi-amends-norms-resolution-professional-to-provide-opinion-7416053\/\" style=\"text-decoration:none\" target=\"_blank\" rel=\"noopener\"><span style=\"font-size:11pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#1155cc\"><u>IE<\/u><\/span><\/span><\/span><\/a><\/p>\n<p>\u00a0<\/p>\n","protected":false},"excerpt":{"rendered":"<p>In News Recently, the Insolvency and Bankruptcy Board of India (IBBI) has amended the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016. About The amendments were aimed at enhancing the discipline, transparency, and accountability in corporate insolvency proceedings. In March 2021 a sub-committee of the Insolvency Law Committee (ILC) [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":12167,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[21],"tags":[31,30,26,46],"class_list":["post-12166","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-current-affairs","tag-government-policies-interventions","tag-gs-2","tag-gs-3","tag-indian-economy-related-issues"],"acf":[],"jetpack_featured_media_url":"https:\/\/wp-images.nextias.com\/cdn-cgi\/image\/format=auto\/ca\/uploads\/2023\/07\/5040192current-affairs.jpg","_links":{"self":[{"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/posts\/12166","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/comments?post=12166"}],"version-history":[{"count":0,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/posts\/12166\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/media\/12167"}],"wp:attachment":[{"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/media?parent=12166"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/categories?post=12166"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/tags?post=12166"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}