[Analysis] Streamlining Insolvency Compliance | Proposed Changes to CIRP Forms

  • Blog|Advisory|Insolvency and Bankruptcy Code|
  • 5 Min Read
  • By Taxmann
  • |
  • Last Updated on 13 June, 2024

Insolvency Compliance

Insolvency Compliance refers to the adherence to legal and regulatory requirements governing the process of resolving insolvency cases. This includes filing necessary forms, meeting deadlines, and providing accurate information to regulatory bodies.
Changes in CIRP Forms:
– Form IP-1 (Pre-assignment Form): Dropped – Details now submitted via the assignment portal.
– Form CIRP-1: Merged into CP-1 – To be filed after the constitution of the Committee of Creditors (CoC).
– Form CIRP-2, CIRP-3, CIRP-4: Merged into CP-2 – To be filed after the issue of the Request for Resolution Plan (RFRP).
– Form CIRP-5: Revamped into CP-3A and CP-3B – Separate forms for application details and AA's decisions.
– Form CIRP-6: Dropped – Information captured in other forms.
– Form CIRP-7: Revamped into CP-5 – Monthly updates with minimal fields.
– Form CIRP-8: Revamped into CP-4 – Focuses on avoidance transactions reported to the AA.

Table of Contents

  1. Introduction
  2. Proposed Changes to CIRP Forms
  3. Simplified Monthly Reporting for Insolvency Professionals to Ease Compliance
  4. Impact of the Proposals
  5. Conclusion

1. Introduction

Professionals are often burdened with extensive paperwork and complex compliance requirements in the fast-paced world of insolvency resolution. Recognising this challenge, the Insolvency and Bankruptcy Board of India (IBBI) has proposed simplifying and streamlining these processes.

During the 27th meeting of the Financial Stability and Development Council (FSDC) on May 8, 2023, a clear directive was issued to reduce the compliance burden on insolvency professionals (IPs) and create an efficient regulatory environment. In response, IBBI released a discussion paper on June 10, 2024, suggesting significant changes to the Corporate Insolvency Resolution Process (CIRP) forms.

The objective is to make compliance easier, faster, and more effective, allowing professionals to focus on resolving insolvency cases efficiently. Let’s explore these proposed changes in detail and understand their potential impact on the industry.

Taxmann.com | Research | IBC

2. Proposed Changes to CIRP Forms

Several significant changes have been proposed to streamline compliance and reduce the burden on insolvency professionals (IPs) for the forms and reporting requirements associated with the Corporate Insolvency Resolution Process (CIRP). These changes are presented in tabular format for better understanding.

Current Form Details Proposed Change Reason for Change
Form IP-1 (Pre-assignment Form) Includes consent to accept assignment as IRP/RP, details of IP and the applicant, details of the person undergoing the process, etc. Dropped Relevant details are submitted in the assignment portal and other compliances.
Form CIRP-1                   Filed within seven days of public announcement. Includes details of IRP, CD, and the applicant; admission of application by AA; etc. Merged into CP-1: A single form to be filled out after the constitution of the CoC. To streamline initial reporting by reducing duplication and simplifying data submission.
 Form CIRP-2                   Filed within seven days of confirmation/replacement. Includes details of the Authorised Representative selected by IRPs for a class of creditors, taking over management of the CD, receipt and verification of claims, the constitution of CoC, the first meeting of CoC, etc. Merged into CP-2: A single form to be filled out after the issue of RFRP. To simplify mid-process reporting, ensuring all relevant information is captured in one streamlined form.
Form CIRP-3                   Filed within seven days of issuing the Information Memorandum to CoC members. This includes details of RP and registered valuers, handing over CD records by IRP to RP, taking over CD management, etc. Merged into CP-2: A single form to be filled out after the issue of RFRP. To simplify mid-process reporting, ensuring all relevant information is captured in one streamlined form.
Form CIRP-4                   Filed within seven days of issuing the Request for Resolution Plan (RFRP). Includes expression of interest, RFRP & modifications, evaluation matrix and modifications, etc. Merged into CP-2: A single form to be filled out after the issue of RFRP. To simplify mid-process reporting, ensuring all relevant information is captured in one streamlined form.
Form CIRP-5                   Filed within seven days of the AA’s approval or rejection of the resolution plan or issuance of a liquidation order. Includes updated list of claimants, updated CoC, details of resolution applicants, details of resolution plans received, details of approval or rejection of resolution plans by CoC, etc. Revamped into CP-3A and CP-3B: – CP-3A: Captures details of the application filed with AA for approval of resolution plan, liquidation, or closure (including by way of withdrawal, settlement, and others). – CP-3B: Captures details of the AA’s order approving the resolution plan or ordering liquidation or closure. To ensure clear and distinct reporting of application details and AA’s decisions, enhancing clarity and accuracy.
Form CIRP-6                   Filed within seven days of significant events such as raising interim finance, commencement of insolvency resolution for CD guarantors, and extensions of the CIRP period. Dropped Relevant information is already captured in other forms, making this form unnecessary.
Form CIRP-7                   If any prescribed activity isn’t completed by the specified date, the IRP or RP must file Form CIRP 7 within three days and every 30 days after that. Revamped into CP-5: A simple form with minimal fields to be submitted by each month’s end. To ensure timely and efficient monthly updates with a focus on critical information.
Form CIRP-8                   Resolution professionals must file Form CIRP 8 with details of their opinion and determination under regulation 35A by the 140th day from the insolvency commencement date. Revamped into CP-4: Focuses only on the details of avoidance transactions reported to the AA. To simplify reporting by capturing only essential details at the application stage.

3. Simplified Monthly Reporting for Insolvency Professionals to Ease Compliance

Currently, insolvency professionals (IPs) must adhere to a complex timeline for filing various CIRP forms, with due dates triggered by specific events such as the commencement of insolvency, public announcements, and the Resolution Professional (RP) appointment. This creates a scattered filing schedule that can be particularly challenging for IPs managing multiple assignments.

The new proposal suggests transitioning to a monthly compliance reporting framework to address this. Under this system, IPs would report the status and progress of the CIRP as of the last day of each month. These reports would be due by the 10th day of the following month. This change aims to simplify the compliance process, reduce administrative burdens, and ensure a more consistent and manageable filing schedule for IPs.

4. Impact of the Proposals

By centralising compliance procedures and migrating specific obligations to the IBBI website, these proposals aim to simplify the compliance process, enhance accessibility, and improve regulatory oversight. The key benefits include:

  • Reduced Compliance Burden – Fewer forms and streamlined reporting requirements.
  • Efficient Monitoring – Better data availability for effective decision-making by the IBBI.
  • Time-saving – A more efficient process allowing IPs to focus on their core responsibilities.

5. Conclusion

The IBBI’s proposals mark a significant step towards a more streamlined and efficient compliance process for insolvency professionals. By simplifying forms, consolidating reporting, and introducing a monthly compliance framework, these changes aim to ease the compliance burden on IPs while ensuring comprehensive and timely information for monitoring purposes. This transformation could be beneficial, paving the way for a more streamlined insolvency process in India.

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