In what would make it tougher for unscrupulous elements, including promoters, to manipulate the insolvency resolution process of a stressed firm, the government on Tuesday amended the Corporate Insolvency Resolution Process Regulations, providing for more stringent scrutiny of resolution applicants before their plan is considered by the committee of creditors. The amendment is aimed at ensuring that “as part of due diligence, prior to the approval of a resolution plan, the antecedents, creditworthiness and credibility of a resolution applicant, including of promoters, are taken into account by the committee of creditors”, the Insolvency and Bankruptcy Board of India (IBBI) said on Tuesday. Late last month, the corporate affairs ministry had clarified that a resolution plan approved by the committee of creditors and the adjudicating authority doesn’t require shareholders’ nod for implementation. It was aimed at enabling lenders to go ahead and find ways of rescuing a company, or realise its asset value, without interruption from hostile promoters. The latest amendment will ensure that the corporate insolvency resolution process results in a “credible and viable resolution plan”. The revised regulations make it incumbent upon the resolution professional to ensure that the resolution plan presented to the committee of creditors contains relevant details to assess the credibility of the applicants.
The resolution applicant would provide details, including “in terms of convictions, disqualifications, criminal proceedings, categorisation as wilful defaulter as per RBI (Reserve Bank of India) guidelines, debarment imposed by Sebi (Securities and Exchange Board of India), if any, and transaction, if any, with the corporate debtor in the last two years”, the IBBI said in a statement.
The insolvency resolution professional has to also submit details of transactions observed or determined, if any, covered under Section 43 (Preferential Transactions); Section 45(Undervalued Transactions); Section 50 (Extortionate Credit Transactions); Section 66 (Fraudulent Transactions) under the Insolvency and Bankruptcy Code, 2016, the IBBI said.