Proposed Amendments to the Insolvency and Bankruptcy Code (IBC), 2016
The Insolvency and Bankruptcy Board of India (IBBI) has released a discussion paper proposing amendments to the IBC, focusing on the following areas:-
Concurrent Invitation of Resolution Plans
- Allow resolution plans for both the entire company under insolvency and its specific assets or businesses simultaneously.
- This change aims to eliminate the need for resolution professionals (RPs) to seek asset-specific plans only after failing to invite plans for the whole entity.
Coordination for Interconnected Entities
- Acknowledges complex corporate structures in sectors like real estate and power generation.
- Proposes a regulated mechanism for coordinating Corporate Insolvency Resolution Processes (CIRPs) across interconnected entities, moving towards a group insolvency framework.
- Suggests the appointment of a single RP for group entities for consolidated asset acquisition.
Coordination Mechanisms
- Proposes joint hearings, common RPs, information sharing protocols, and coordinated timelines for interconnected entities.
- Absence of coordination leads to inefficiencies, increased costs, and potential conflict.
Committee of Creditors (CoC) and Resolution Professionals (RPs)
- Amendments would require RPs to present all resolution plans to the CoC, regardless of compliance status, with detailed compliance reports.
- Experts suggest a shift towards CoCs driving the process, potentially diminishing the role of RPs.
- Importance of balancing power between RPs and CoCs emphasized.
Moratorium Provisions and Operational Expenses
- Discussion on the incorrect application of moratorium provisions in some cases.
- Suggests mandatory regular review of significant operational expenses, particularly for leased properties.
Interim Financing
- Proposal to allow CoCs to invite interim finance providers as observers in meetings, without voting rights.
- This aims to enhance transparency, risk assessment, and participation from interim financiers.
