The Insolvency and Bankruptcy Board of India (IBBI), on Wednesday, notified the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) (Second Amendment) Regulations, 2016. The IBBI amended these regulations seeking to enhance transparency, discipline, and accountability in the corporate insolvency proceedings.
A corporate debtor might have changed its registered office or name before the commencement of insolvency proceedings. In such a case, the stakeholders may face difficulty relating to the new registered office or the name of the corporate debtor. Thus, the IBBI amended the regulations to include all the corporate debtor’s former registered addresses or names.
The amendment requires the Insolvency Professional (IP) conducting Corporate Insolvency Resolution Process (CIRP) to disclose all former registered office addresses and names of the corporate debtor changed in the past two years of the commencement of insolvency. The IP should disclose the former and current registered office addresses and names of the corporate debtor in all the records and communications.
The Resolution Professional (RP) or Interim Resolution Professional (IRP) can appoint any professional, including registered valuers, to assist him/her in discharging the duties in conducting the CIRP. The IBBI amended and provided that the IRP or RP could appoint a professional other than registered valuers if he believes there is a requirement of such professional services and such services are not available with the corporate debtor.
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The IRP or RP can appoint a professional other than the registered valuers on an arm’s length basis following a transparent and objective process. The IRP or RP should raise the invoice for the fee in the name of the professional, and the payment should be made into the professional’s bank account.
The RP is duty-bound to find out if a corporate debtor is subject to avoidance transactions. The avoidance transactions may be extortionate credit transactions, preferential transactions, undervalued transactions, fraudulent trading, and wrongful trading. The RP should file applications if any avoidance transactions exist by the corporate debtor with the Adjudicating Authority seeking appropriate relief.
The appropriate relief of the avoidance transactions by the Adjudicating Authority claws back the value lost in such transactions, thus increasing the possibility of reorganisation of the corporate debtor through a resolution plan. It also disincentives such transactions preventing stress to the corporate debtor.
The IBBI amendment requires the RP to file Form CIRP-8 on the IBBI electronic platform, intimating their opinion and determination regarding avoidance transactions. The RPs need to file Form CIRP-8 regarding every ongoing and commencing CIRP on or after 14th July 2021.
The IBBI notified that the amendments to the IBBI (Insolvency Resolution Process for Corporate Persons) (Second Amendment) Regulations, 2016 are effective from 14th July 2021. These amendments provide for disciplined and transparent insolvency proceedings, thus making the CIRP a smooth and better process for the RPs, stakeholders, and the corporate debtors.
For any clarifications/feedback on the topic, please contact the writer at mayashree.acharya@cleartax.in.
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