On January 31, 2024, the Insolvency and Bankruptcy Board of India ("IBBI") amended the IBBI (Insolvency Resolution Process for Personal Guarantors to Corporate Debtors) Regulations, 2019 ("Insolvency Resolution Regulations") and IBBI (Bankruptcy Process for Personal Guarantors to Corporate Debtors) Regulations, 2019 ("Bankruptcy Regulations") via the IBBI (Insolvency Resolution Process for Personal Guarantors to Corporate Debtors) (Amendment) Regulations, 2024 ("Insolvency Amendment Regulations") and the IBBI (Bankruptcy Process for Personal Guarantors to Corporate Debtors) (Amendment) Regulations, 2024 ("Bankruptcy Amendment Regulations") (collectively referred as "Amendment Regulations") respectively.

Amendments:

  1. Pursuant to the Insolvency Amendment Regulations, Regulation 4(1) of the Insolvency Resolution Regulations, which provides that an insolvency professional shall be eligible to be appointed as a resolution professional ("RP") for a resolution process if she is inter alia independent of the guarantor, has been amended. The Explanation to Regulation 4(1) of the Insolvency Resolution Regulations, which sets out the circumstances in which a person shall be considered independent of the guarantor, has been amended to remove the ineligibility in respect of persons who have acted or is acting as interim RP, RP or liquidator to the corporate debtor.
  1. A similar amendment has been made in Regulations 3(1) and 5(1) of the Bankruptcy Regulations pursuant to the Bankruptcy Amendment Regulations, in respect of eligibility of bankruptcy trustee and professionals such as accountants, registered valuers, advocates etc. appointed to assist the bankruptcy trustee in the discharge of her functions.
  1. Another key amendment in the Insolvency Amendment Regulations is insertion of Regulation 17A (Meeting of the Creditors), which requires the RP to place the repayment plan prepared by the debtor in consultation with the RP under Section 105 of the Insolvency and Bankruptcy Code, 2016 ("Code") in a meeting of the creditors for their consideration. Further, if the repayment plan is not received within the period stipulated under Section 106 of the Code, the RP is required to notify the same in a meeting of the creditors.

Author's view:

  1. Removal of the bar in respect of having a common RP for the corporate debtor and the personal guarantor is a welcome move in view of the interconnectedness of the corporate debtor and the personal guarantor. Having a common RP would lead to increased efficiency in the resolution process for both the corporate debtor as well as the personal guarantor due to better coordination and information symmetry.
  1. Prior to the Amendment Regulations, a personal guarantor was required to submit a repayment plan to the RP who would evaluate and prepare a report on the same to be submitted to the adjudicating authority and recommend therein whether there is a requirement for a meeting of creditors to consider the contents of the repayment plan. However, the insertion of Regulation 17A has made such meeting of creditors for consideration of the repayment plan mandatory. In case of insolvency of personal guarantors, which could be more complex as compared to other individual insolvencies, a meeting of creditors to consider the repayment plan would facilitate active involvement of the creditors in the resolution process and provide a more comprehensive perspective on the repayment plan.

The Amendment Regulations are effective from January 31, 2024 and are available here and here.

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