1. The Insolvency and Bankruptcy Code (Amendment) Act, 2021
The Insolvency and Bankruptcy Code (Amendment) Act, 2021 ("Act") provides for a pre-packaged insolvency resolution process ("PPIRP") for Micro, Small, and Medium Enterprises. As provided in the Statements and Objectives of the Act, the Micro, Small, and Medium ("MSME") Enterprises sector is critical to the economy considering their significant contribution to our gross domestic product and generation of employment to a sizeable population. It has, therefore, been considered necessary to urgently address the specific requirements of the sector by providing an efficient and alternative framework under the Insolvency & Bankruptcy Code ("I&B Code") for a quicker, cost-effective insolvency resolution process that is least disruptive to the businesses, ensuring, among other objectives, job preservation.
The Act inter alia provides for the following:
- Specifying a minimum threshold of not more than one crore rupees for initiating PPIRP.
- Disposal of simultaneous applications for initiation of Corporate Insolvency Resolution Process ("CIRP") and PPIRP, pending against the same corporate debtor.
- Penalty for fraudulent or malicious initiation of PPIRP or with intent to defraud persons.
- Punishment for offenses related to PPIRP.
Some of the provisions of the Act are as follows:
- In case an application is filed for PPIRP in respect of the
same corporate debtor:
- within 14 days of the filing of any application for CIRP, which is pending, then the Adjudicating Authority ("AA") shall first dispose of the application for PPIRP.
- after 14 days of the filing of any application for CIRP, which is pending, then the AA shall first dispose of the application for CIRP.
- The Resolution Professional ("RP") shall submit the resolution plan, as approved by the committee of creditors, to the AA within 90 days from the pre-packaged insolvency commencement date.
- During the PPIRP period, the management of the affairs of the Corporate Debtor ("CD") shall continue to vest with the Board of Directors of the CD.
- The PPIRP shall be completed within 120 days from the pre-packaged insolvency commencement date.
2. Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) (Second Amendment) Regulations, 2021
Insolvency and Bankruptcy Board of India vide its notification dated 14.07.2021, amended the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 to increase discipline, transparency, and accountability in corporate insolvency proceedings. The major amendments are:
- An Interim Resolution Professional ("IRP") or RP, who is a director or a partner of an insolvency professional entity shall not continue as the IRP or RP in a CIRP if the insolvency professional entity or any other partner or director of such insolvency professional entity represents any other stakeholder in that CIRP.
This amendment has been introduced to eliminate conflict of interest amongst Insolvency Professionals ("IP").
- The amendment requires an IP conducting CIRP to disclose all former names and registered office address (es) so changed in the two years preceding the commencement of insolvency along with the current name and registered office address of the CD, in all its communications and records.
This amendment has been brought about to ensure that stakeholders who are unable to identify the CD due to the new name or registered office address, can participate in the CIRP.
- The IRP/RP may appoint:
- Two registered valuers to determine the fair value and the liquidation value of the CD in accordance with regulation 35; and
- any other professional to assist him in the discharge of his duties in the conduct of the CIRP, if he is of the opinion that the services of such professional are required and such services are not available with the CD.
Such appointments shall be made on an arm's length basis following an objective and transparent process. The following persons cannot be appointed as professionals if they are:
- relative of RP
- a related party of CD
- an auditor of the CD at any time during the period of five years preceding the insolvency commencement date
- a partner or director of the insolvency professional entity of which the resolution professional is a partner or director.
- For effective monitoring, the RP must file Form CIRP 8 on the electronic platform of the IBBI, intimating details of his opinion and determination in respect of Preferential and other transactions.
The Form must be filed on or before the 140th day of the insolvency commencement date.
3. Filing of Form CIRP 8 under the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016
The Insolvency Bankruptcy Board of India ("IBBI"), vide Circular dated 20.07.2021 has specified the format of CIRP 8 for intimating details of his opinion and determination under regulation 35A, by the 140th day of the insolvency commencement date.
The Form is required to be filed for all CIRP ongoing or commencing on or after 14.07.2021 on IBBI's website.
4. Guidance notes for companies undergoing Corporate Insolvency Resolution Process by NSE/BSE
The IP is required to ensure that the company complies with the applicable laws, including SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2018.
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