India: Other Amendments

1) IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 on 5th October, 2018

In August 2018, many new changes were introduced in the Code and to accommodate such changes on 5th October, 2018 amendment to the Insolvency and Bankruptcy Board of India (Insolvency Resolution for Corporate Persons) Regulations, 2016 ("Regulations") were notified.

Apart from the small changes in the Regulations, the following are the major changes that took place.

a) Dissenting Financial Creditors

Before the amendment, regulation 2 clause (f) defined the term dissenting financial creditors which means a financial creditor who voted against the resolution or abstained from voting for the resolution plan, approved by the committee.

However, under the amended regulations, regulation 2 clause (f) i.e. dissenting financial creditors has been omitted from the CIRP regulations.

b) Claims by other Creditors

A new Regulation 9A has been inserted which provides for the filling of claims by other creditors to the Interim Resolution Professional or Resolution professional as the case may be.

Under regulation 9A, a person claiming to be a creditor, other than those covered under regulations 7, 8, or 9, shall submit its claim with proof to the interim resolution professional or resolution professional in person, by post or by electronic means in Form F of the Schedule.

Further the existence of the claim of the creditor may be proved on the basis of:

  1. the records available in an information utility, if any, or
  2. other relevant documents sufficient to establish the claim, including any or all of the following:-
    1. Documentary evidence demanding satisfaction of the claim;
    2. Bank statements of the creditor showing non-satisfaction of claim;
    3. An order of court or tribunal that has adjudicated upon non-satisfaction of claim, if any.

c) Contents of notice of Committee of Creditors Meeting

The Regulation 21 sub-regulation (3) was substituted with insertion of new sub-regulation (3). As per the substituted sub-regulation (3), the notice of the meeting shall contain (i) a list of the matters to be discussed at the meeting; (ii) A list of the issues to be voted upon at the meeting; and (iii) Copies of all documents relevant to the matters to be discussed and the issues to be voted upon at the meeting.

Clause (a) and clause (b) of prior Sub-regulation (3) have been omitted. Accordingly, notice of the meeting shall not specifically contain (i) agenda of the meeting; (ii) as well as a statement stating that a vote of the members of the Committee shall not be taken at the meeting unless all members are present at the meeting.

d) Minutes of the meeting to be circulated to creditors in class and voting in case of creditors in class

As per the substituted Regulation 25 sub-regulation (5), the resolution professional now needs to circulate the minutes of the meeting by electronic means to all members of the committee and the authorized representative, if any, within 48 hours of the conclusion of the meeting.

Further as per newly inserted sub-regulation (6), the authorized representative shall circulate the minutes of the CoC meeting received under sub-regulation (5) to creditors in a class and announce the voting window at least 24 hours before the window opens for voting instructions and keep the voting window open for at least twelve hours.

Furthermore, post amendment sub-regulation 1A under Regulation 26 has been inserted which clearly provides that the authorized representative shall exercise the votes either by electronic means or through electronic voting system as per the voting instructions received by him from the creditors in the class pursuant to sub-regulation (6) of regulation 25.

e) Contents of Resolution Plan

Amended Regulation 38 (1) provides that under the resolution plan the amount due to the operational creditors shall be given priority in payment over financial creditors. Further post the amendment sub-regulation (1A) has been inserted under regulation 38 which provides that a resolution plan shall include a statement as to how it has dealt with the interests of all stakeholders, including financial creditors and operational creditors, of the corporate debtor.

f) Preservation of CIRP records

An Interim resolution professional or the resolution professional, as the case may be, shall preserve a physical as well as an electronic copy of the records relating to corporate insolvency resolution process of the corporate debtor as per the record retention schedule as may be communicated by the Board in consultation with Insolvency Professional Agencies.

2) Amendment in Liquidation Process Regulations

IBBI vide notification No. IBBI/2016-17/GN/REG005 amended the IBBI (Liquidation Process) Regulations, 2016 on 22nd October, 2018 to enable a liquidator to sell the business of the Corporate Debtor (CD) as a going concern subject to security interest on the assets of CD. These provide that where valuation has been conducted during CIRP, the liquidator shall consider such valuations. Otherwise, the liquidator shall within seven days of the liquidation commencement date, appoint two registered valuers to determine the realizable value of the assets or businesses of the CD.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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