Key Amendments to Insolvency Resolution Process Regulations in India 2023

The Insolvency and Bankruptcy Board of India (IBBI) introduced the IBBI (Insolvency Resolution Process for Corporate Persons) (Second Amendment) Regulations, 2023, effective from September 18, 2023. These amendments aim to streamline the insolvency resolution process in India and bring about several changes that impact various stakeholders in the process.

One of the key amendments relates to Regulation 2D, which concerns the details of debt, default, and limitation in applications under Section 7 or Section 9 of the Insolvency and Bankruptcy Code.[1] Under this amendment, financial or operational creditors are now required to submit a chronology of the debt and default, including relevant dates, acknowledgments, and the applicable limitation period. This addition provides a more structured and detailed framework for NCLT benches to assess and process applications under Section 7 or 9. The implementation of Regulation 2D will guarantee that the determination of the validity of limitation defenses and the admissibility of applications occurs at the outset, thereby facilitating timely decisions on these applications.

Another significant change is introduced in Regulation 3A, which deals with the assistance and cooperation by personnel of the corporate debtor.[2] The amendment emphasizes that the interim resolution professional (IRP) or resolution professional (RP) should not only take control of the corporate debtor’s assets but also verify the asset list against the financial records. Any discrepancies should be reported when making an application under Section 19(2). This places a more substantial responsibility on RPs and ensures transparency in asset management.  Although Regulation 4(2) of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 had already stipulated cooperation from the corporate debtor’s personnel, the introduction of Regulation 3A, specifies precise requirements regarding the form and method of providing this information.

In Regulation 12(1), the amendment provides some flexibility to creditors regarding the submission of proof of claims.[3] Creditors who fail to meet the initial submission deadline mentioned in the public announcement can now submit their claims with proof up to the date of the request for resolution plans (RFRP) or ninety days from the insolvency commencement date (ICD), whichever is later, provided they give reasons for the delay. This extension eases the burden on creditors and allows them additional time to submit their claims.

However, the same amendment also introduces a requirement for RPs to file an application before the Adjudicating Authority (AA) for condonation of delay when creditors submit their claims late.[4] This adds a new layer of complexity to the process, potentially leading to more litigation and further delays in the resolution plan finalization.

The amendments also impact the role of authorized representatives (ARs). Regulation 16A(3A) now allows financial creditors representing at least ten percent voting share to request a replacement of the authorized representative with an insolvency professional of their choice. The RP is responsible for presenting this request to the creditors in that class and opening a voting window for a decision.[5] This change gives creditors more control over their representation.

Furthermore, the compensation structure for ARs has been revised in Regulation 16A (8). ARs are entitled to fees for attending committee meetings, with the fee amount varying based on the number of creditors in their class. The fees for additional meetings beyond the initial two meetings are subject to approval by the committee of creditors.[6]

Regulation 10 introduces an expanded role for authorized representatives. They are now responsible for assisting creditors in understanding committee meetings, reviewing meeting minutes, facilitating asset marketing strategies, cooperating with creditors to enhance asset marketability, evaluating resolution plans, ensuring access to necessary information, keeping creditors updated on progress, making suggestions for plan modifications, and representing creditors before relevant authorities.[7]

A new provision in Regulation 28(1) requires that both the transferor and transferee inform the interim resolution professional or resolution professional within seven days of the assignment or transfer of debts.[8] This ensures transparency and clarity in the event of debt transfers during the insolvency resolution process.

Regulation 30B introduces the concept of an audit of the corporate debtor. This can be proposed by committee members and, if approved, conducted by a qualified insolvency professional. The audit report is presented to the committee along with comments from the IRP or RP, and the expenses of the audit are treated as insolvency resolution process costs.[9] This amendment enhances transparency and accountability in the insolvency process.

Lastly, Regulation 36B (1) specifies that the RP must issue the information memorandum, evaluation matrix, and a request for resolution plans to every resolution applicant within five days of preparing the final list of prospective resolution applicants.[10] This ensures that all potential bidders have access to the necessary information simultaneously.

The amendments also impact the model timeline for the corporate insolvency resolution process, as detailed in Regulation 40A and 40B. The revised model timeline now reflects the changes introduced by the amendments.[11]

In conclusion, an analysis of the IBBI amendments, as a whole demonstrates that significant measures have been implemented to provide flexibility for all stakeholders while simultaneously upholding accountability and transparency in the corporate insolvency and resolution process. These amendments to the insolvency resolution process seek to enhance transparency, streamline procedures, and empower stakeholders while introducing some additional complexities, especially concerning late claim submissions and the role of authorized representatives. The overarching goal is to improve the efficiency and effectiveness of the insolvency resolution process in India.

[1] Reg. 2D, Details of debt, default and limitation in respect of applications under section 7 or section 9

[2] Reg. 3A, Assistance and cooperation by the personnel of the corporate debtor.

[3] Reg. 12(1), Submission of proof of claim

[4] Reg. 13(1A), 13(1B), 13(1C), Verification of claims

[5] Reg. 16A(3A), 16(3B), 16(3C), Authorised Representative

[6] Reg. 16A (8), Authorised Representative

[7] Reg. 10, Authorised Representative

[8] Reg. 28(1), Transfer of debt due to creditors.

[9] Reg. 30B, Audit of Corporate Debtor

[10] Reg. 36B (1) Request for resolution plans

[11] Reg. 40A and 40B