The Insolvency and Bankruptcy Board of India (IBBI) on Wednesday issued revised norms to initiate insolvency resolution process, paving way for homebuyers to seek relief as financial creditors and allowing conditional withdrawal of insolvency applications, among other key changes.
The regulator put in place time frames to be adopted by resolution professionals (RPs) and stipulated that an RP should assess whether a corporate debtor had indeed indulged in fraudulent transactions within a time-line during the resolution process.
The changes to the IBBI (Insolvency Resolution Process for Corporate Persons) regulations were necessitated after the government had issued an ordinance last month amending the Insolvency and Bankruptcy Code (IBC). The changes will provide more clarity on procedural requirements for various classes of creditors, including homebuyers.
“Wherever the corporate debtor has classes of creditors having at least ten creditors in the class, the interim resolution professional shall offer a choice of three insolvency professionals… to act as the authorised representative of creditors in each class.
“… The insolvency professional, who is the choice of the highest number of creditors in the class, shall be appointed as the authorised representative of creditors of the respective class,” an official release said.
Where the interest rate has not been agreed upon between the parties, the voting share of such a creditor would be in proportion to the financial debt that also includes an annual 8% interest rate. This will apply to cases like those of homebuyers, as the norms now provide clarity on the calculation of total financial debt that would influence their voting rights.
As for time frames, RPs have to publish an invitation for expression of interest (EoI) by the 75th day from the insolvency commencement date. RPs have to publish a provisional list of prospective applicants within 10 days from the EoI submission deadline.
“The resolution professional shall issue the information memorandum, the evaluation matrix and the request for resolution plans (RFRP) within five days of issue of the provisional list to the prospective resolution applicants and allow at least 30 days for submission of resolution plans,” the release said. The resolution plan will also have to show that it addresses the cause of default and that the applicant has the ability to implement the plan, among other issues.
An application seeking withdrawal of insolvency proceedings will be accepted if it has been cleared by the committee of creditors (CoC) with a 90% voting share. Once the CoC’s nod is in place, the resolution professional has to submit the application to the adjudicating authority on behalf of the applicant within three days of such an approval.
“A meeting of the CoC shall be called by giving not less than five days’ notice in writing to every participant. The CoC may, however, reduce the notice period from five days to such other period of not less than forty-eight hours where there is any authorised representative and to twenty-four hours in all other cases,” the release said.
