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Insolvency and Bankruptcy Board of India Regulations, 2016, amended by IBBI

  • Category
    Economy
  • Published
    26th Jul, 2021

The Insolvency and Bankruptcy Board of India (IBBI) amended the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) (Second Amendment) Regulations, 2016.

Context

The Insolvency and Bankruptcy Board of India (IBBI) amended the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) (Second Amendment) Regulations, 2016.

About

The amended provisions in the IBBI regulations

  • The amendment regulations seek to enhance discipline, transparency, and accountability in corporate insolvency proceedings.

                               Problems

                          Amendments

In case of corporate debtor (CD) changed its name or registered office address before commencement of insolvency. The stakeholders may find it difficult to relate to the new name or registered office address and consequently fail to participate in the Corporate Insolvency Resolution Process (CIRP).

The amendment requires an insolvency professional (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.

The interim resolution professional (IRP) or resolution professional (RP) may appoint any professional, including registered valuers, to assist him in the discharge of his duties in the conduct of the CIRP.

 

  • The amendment provides that the IRP/RP may appoint a professional, other than registered valuers if he thinks that the services of such professionals 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 invoice for the fee shall be raised in the name of the professional and be paid into his bank account.

The value lost in transactions increasing the possibility of re-organisation of the CD through a resolution plan.

  • The RP is duty-bound to find out if a CD has been subject to avoidance transactions, namely, preferential transactions, undervalued transactions, extortionate credit transactions, fraudulent trading and wrongful trading, and file applications with the Adjudicating Authority seeking appropriate relief.

 Insolvency and Bankruptcy Code, 2016 (IBC)

  • The Insolvency and Bankruptcy Code, 2016(IBC) is the bankruptcy law of India which seeks to consolidate the existing framework by creating a single law for insolvency and bankruptcy.
  • The bankruptcy code is a one stop solution for resolving insolvencies which previously was a long process that did not offer an economically viable arrangement.
  • The code aims to protect the interests of small investors and make the process of doing business less cumbersome.
  • The Code establishes the Insolvency and Bankruptcy Board of India, to oversee the insolvency proceedings in the country and regulate the entities registered under it.
  • The Board will have 10 members, including representatives from the Ministries of Finance and Law, and the Reserve Bank of India.

Insolvency and Bankruptcy Board of India

  • It was established in 2016 under the Insolvency and Bankruptcy Code, 2016 (Code).
  • It is a key pillar for the implementation of the Code.

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