On September 18, 2023, the Insolvency and Bankruptcy Board of India (“IBBI”) amended the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 (“CIRP Regulations”) vide the IBBI (Insolvency Resolution Process for Corporate Persons) (Second Amendment) Regulations, 2023 (“CIRP Amendment Regulations”).

IBBI had published a discussion paper on measures for increasing the possibility of resolution, value of resolution plan and enabling timely resolution on June 7, 2023 (“Discussion Paper”), which analysed several issues that were adversely affecting the efficiency and effectiveness of the resolution process. In an attempt to resolve the aforesaid issues, IBBI has amended the CIRP Regulations. A brief overview of the amendments made pursuant to the CIRP Amendment Regulations is as follows:

1. A new regulation (Regulation 2D) has been inserted in the CIRP Regulations to provide that while filing an application under section 7 (by a financial creditor) or section 9 (by an operational creditor), the financial creditor or the operational creditor, as the case may be, shall also submit along with evidence, chronology of the debt and default including the date when the debt became due, date of default, dates of part payments, if any, date of last acknowledgment of debt and the limitation applicable.
2. As per Regulation 4(2) of the CIRP Regulations, it is mandatory for the personnel of the corporate debtor (“CD”), its promoters or any other person associated with the management of the CD to provide information within such time and format as sought by the interim resolution professional (“IRP”) or the resolution professional (“RP”), as the case may be. However, in the Discussion Paper it was noted that such information was not provided in a timely/ efficient manner and that the CIRP Regulations do not provide the procedure for taking control and custody of assets of the CD by the IRP/ RP. Accordingly, a new regulation (Regulation 3A) has been inserted in the CIRP Regulations, which lays down the procedure for taking control and custody of the assets and records of the CD by the IRP/ RP.

3. Regulation 12 of the CIRP Regulations provided that creditors should submit their claims to the IRP/ RP on or before the last date mentioned in the public announcement, failing which creditors may submit their claim on or before the 90th (ninetieth) day of the insolvency commencement date. In the Discussion Paper it was noted that in many cases there was a delay in submission of claims by the creditors which led to such creditors making applications before the adjudicating authority (“AA”) seeking their permission for submission of their claims. It was observed that this increased the burden of the AA and also led to uncertainty and delay in the resolution process. Accordingly, Regulation 12 of the CIRP Regulations has been amended to increase the outer timeline for submission of claims to the date of issue of request for resolution plans under Regulation 36B or 90 (ninety) days from the insolvency commencement date, whichever is later. Further, Regulation 13 of the CIRP Regulations has been amended to provide that where the IRP/ RP does not collate the claim after verification, it shall provide reasons for the same.

4. Regulation 16A of the CIRP Regulations which deals with the rights and duties of authorised representatives (“ARs”) of the financial creditors (“FCs”) has been amended to provide enhanced responsibilities of ARs, including (i) assisting the creditors in a class it represents in understanding the discussions and considerations of the committee meetings and facilitating informed decision-making; (ii) reviewing the contents of minutes prepared by the RP and providing comments, if any, to the RP; and (iii) assisting the creditors it represents in evaluating the resolution plans submitted by resolution applicants and making suggestions for modifications of the resolution plan as may be required by the creditors it represents. Further, the procedure to replace the ARs has been laid down and the fees payable to ARs has been increased in view of the enhanced responsibilities.

5. In case of an assignment or transfer of debt by any creditor during the insolvency process, both the original creditor and the assignee were required to inform the IRP/ RP of the same, as per Regulation 28 of the CIRP Regulations. Regulation 28 of the CIRP Regulations has now been amended to provide a timeline of 7 (seven) days from such assignment or transfer for providing such intimation to the IRP/ RP.

6. A new regulation (Regulation 30B) has been inserted in the CIRP Regulations to provide that any member(s) of the committee of creditors (“CoC”) may propose an audit of the CD along with the objectives, scope, estimate of the costs, timeframe and name(s) of the proposed auditor(s) and that such audit shall be conducted if the proposal is approved by the CoC. The expenses of such audit shall be treated as insolvency resolution process costs.

7. Pursuant to the CIRP Amendment Regulations the timelines in respect of various procedural aspects such as the information memorandum and request for resolution plans have been aligned.
8. The format of the ‘Interest for Expression of Interest’ (Form G of the CIRP Regulations) has been amended to provide more information to the prospective resolution applicants (“PRAs”), in order to improve the value received in the resolution plan.
9. Regulation 39(4) of the CIRP Regulations mandates the RP to submit the resolution plan approved by the CoC to the AA, inter alia, along with a compliance certificate in Form H. In order to provide transparency and context to the resolution process, Form H has been amended to include the minutes of the CoC meeting relating to discussion and decisions about the resolution plan.

Please find a copy of the Discussion Paper and the CIRP Amendment Regulations here.

This update has been contributed by Aastha (Partner) and Umang Pathak (Associate).

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