IBBI Proposes Measures to Enhance Resolution Chances, RP Value & Timely Resolution in Insolvency Cases

IBC Paper, Dated 07.06.2023

The IBBI has observed that the resolution process under the code is criticized on 2 grounds namely fewer companies are being resolved with lesser value realisation & time taken for resolution is longer than the time prescribed by law. Therefore, IBBI has floated discussion papers to resolve the same.

The proposals include timeline for providing information for assignment of debt, seeking information from personnel of the corporate debtor, Modification of Timelines for Submission and Consolidation of Claims, Increase of duties of Authorised Representative, etc.

1. IBBI Proposes fee increase for Authorised Representatives in CIRP to streamline costs and avoid administrative complexities

The discussion papers have proposed the increase of fee of Authorised Representative. Now, it is proposed that the fee for the AR is designed to be incorporated within the overall cost of the CIRP.

This fee structure is preferable given the potential administrative burden and inefficiencies that could arise from attempting to collect these fees directly from the represented members. The proposals are as under:

2. Propose to amend the norms w.r.t replacement of authorised representative

It is proposed that the creditors in a class with 10% voting powers may seek replacement of the AR by making a request to the RP and may choose to give a choice of insolvency professional who shall act as an AR in the matter.

3. IBBI proposes to mandate requirement of providing a detailed chronology of debt & default

It is proposed that along with the application under sections 7 or 9, as the case may be, for the initiation of corporate insolvency resolution process, the financial creditor or the operational creditor shall also submit an affidavit, providing a detailed chronology of the debt and default, and explaining why the application is not barred by the limitation.

4. IBBI in plan to introduce preference voting for approval of resolution plan

In order to ensure that preference of plan is captured, and creditors are able to vote freely, it is proposed to use system of voting with preference.

5. IBBI proposes to mandate audit of Insolvency Resolution Process Cost (IRPC)

The existing CIRP Regulations provide what constitutes Insolvency Resolution Process Cost (IRPC) but they do not necessitate an audit of these costs. However, considering the significant bearing these costs can have on the overall resolution process, it becomes crucial to assure their veracity.

Therefore, it is proposed to introduce an audit requirement for CIRPs involving CDs of a certain asset size within the CIRP Regulations. Audit timing, eligibility and disqualifications were also provided. Various other proposals were notified. The Comments may be submitted electronically by 27th June, 2023.

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