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insolvency professional agencies

Now IBBI (Insolvency and Bankruptcy Board of India) has mandated that the compliance officer of Insolvency Professional Agency (IPA) submit an annual compliance certificate. The certificate will state that the IPA has complied with the provisions of the Code, regulations, guidelines, circulars etc. issued by IBBI.

The compliance certificate has to be submitted within 45 days from the end of the financial year.

IBBI should consider whether this compliance certificate can be issued by Practising Company Secretaries. That would lend an independent external view which is unbiased and is able to pinpoint the deficiencies in the working of the IPA.

The relevant extracts of the IBBI circular is given below.

In terms of Regulation 7 of the Insolvency and Bankruptcy Board of India (Model Bye-Laws and Governing Board of Insolvency Professional Agencies) Regulations, 2016, an Insolvency Professional Agencies (IPA) shall designate or appoint a compliance officer who shall be responsible for ensuring compliances with the provisions of the Code and regulations, circulars, guidelines, and directions issued thereunder.

The compliance officer is mandated to submit a compliance certificate to the Board annually, verifying that the IPA has complied with the provisions of the Code and regulations, circulars, guidelines, and directions issued thereunder.

In this regard, the format of annual compliance certificate specifying the list of the compliances was issued by the Board vide Circular No: IPA/009/2018 dated 19th April, 2018.

Now in consequence of amendments in regulations and in suppression of the above Circular, the revised format of Annual Compliance Certificate for IPAs is being issued by the Board as per Annexure. All the registered IPAs have to submit the annual compliance certificate to the Board in the said format within 45 days of the end of the financial year.

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insolvency amendment

The Insolvency and Bankruptcy Board of India notified the Insolvency and Bankruptcy Board of India (Liquidation Process) (Second Amendment) Regulations, 2022 (‘Amendment Liquidation Regulations’) and Insolvency and Bankruptcy Board of India (Voluntary Liquidation Process) (Second Amendment) Regulations, 2022 (‘Amendment Voluntary Liquidation Regulations’) on 16th September, 2022.

To enable better participation of stakeholders and streamline the liquidation process to reduce delays and realise better value, the amendment in Liquidation Regulations make the following major modifications:

  • The Committee of Creditors (CoC) constituted during Corporate Insolvency Resolution Process (CIRP) shall function as Stakeholders Consultation Committee (SCC) in the first 60 days. After adjudication of claims and within 60 days of initiation of process, the SCC shall be reconstituted based upon admitted claims.
  • The liquidator has been mandated to conduct the meetings of SCC in a structured and time bound manner with better participation of stakeholders.
  • The scope of mandatory consultation by liquidator, with SCC has been enlarged. Now, SCC may even propose replacement of liquidator to the Adjudicating Authority (AA) and fix the fees of liquidator, if the CoC did not fix the same during CIRP.
  • If any claim is not filed during liquidation process, then the amount of claim collated during CIRP shall be verified by the liquidator.
  • Wherever the CoC decides that the process of compromise or arrangement may be explored during liquidation process, the liquidator shall file application only in such cases before Adjudicating Authority for considering the proposal of compromise or arrangement, if any, within thirty days of the order of liquidation.
  • Specific event-based timelines have been stipulated for auction process.
  • Before filing of an application for dissolution or closure of the process, SCC shall advice the liquidator, the manner in which proceedings in respect of avoidance transactions or fraudulent or wrongful trading, shall be pursued after closure of liquidation proceedings.

The Amendment Liquidation Regulations and Amendment Voluntary Liquidation Regulations further lay down the manner and period of retention of records relating to liquidation and voluntary liquidation of a corporate debtor or corporate person, respectively.

The Amendment Liquidation Regulations and Amendment Voluntary Liquidation Regulations are effective from 16th September, 2022.

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insolvency amendment

IBBI (Insolvency and Bankruptcy Board of India) has vide its notification dated 17th September, 2022 amended the IBBI (Insolvency Resolution Process for Corporate Persons), Regulations 2016 allowing for sale of one or more assets of the insolvent unit instead of as a whole unit, where no resolution plan has been received for the corporate debtor as a whole.

One or more assets can be sold separately to one or more applicants. For that purpose in order to derive a better valuation plan, a marketing strategy can also be devised (along with a marketing budget also, i suppose) and a longer time period given for responses as well as wider circulation of the assets available from the insolvency process.

Further some more changes has been made as under:

(i) Changes timeline for filing application for preferential and other transactions on or before 130
th day of ICD (insolvency commencement date). It provides that a copy of application made regarding preferential and other transactions be shared with the prospective resolution applicants to enable them to account for such information while proposing the resolution plan.
(ii) Changes the timeline for submission of information memorandum to on or before 95th day from the ICD from 54th day. It also mandates that information memorandum should also include further relevant information such as operations of CD (corporate debtor), financial statements, contingent liabilities, geographical coordinates of fixed assets, company overview. It also includes details of business evolution for CDs with asset size of more than Rs.100 crore.

With the aim to reduce delays in the process and enhance efficiency of available time the amendment the amendment enables the CoC (committee of creditors) to examine whether it wants to explore option of compromise or arrangement and file such recommendation with AA(adjudicating authority) while applying to AA for liquidation order. In cases where it decides to explore, it should explore the option during the period, order for liquidation is awaited from the AA. The amendment also introduces guiding factors that may be considered by CoC while making an early decision to liquidate the CD. It also provides that the reasons be recorded based on these factors and presented to AA as part of the application for liquidation.

The amendment also provides the following to make the resolution process more transparent and robust:
(i) A common email address be used throughout the CIRP (corporate insolvency resolution process), and Liquidation of a CD and this email needs to be handed over to the succeeding IP conducting the process.
(ii) The IRP/RP (insolvency resolution professional/ resolution professional) to communicate to the creditors of corporate debtor (CD), as per the last available books of accounts, the public announcement and invite claims through post or electronic means.
(iii) It has been clarified that a meeting of COC can be convened till resolution plan is approved or an order for liquidation is passed and matters which do not affect the resolution plan can be decided upon.

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IBBI amendment

The Insolvency and Bankruptcy Board of India (IBBI/Board) notified the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) (Second Amendment) Regulations, 2016 (CIRP Regulations) on 14th June, 2022.

The amendment provides the operational creditors to furnish extracts of Form GSTR-1, Form GSTR-3B and e-way bills, wherever applicable along with the application filed under section 9 of the Insolvency and bankruptcy Code, 2016. These additional set of documents, can  be used as evidence of transaction with the corporate debtor, debt and default easing the process of admission. These documents will also to be submitted as part of the claims submitted to the resolution professional to help collation of claims. Further, creditors filing applications under section 7 or 9 of the Code are required to furnish details of their PAN and Email ID to ensure smooth correspondence.

In order to improve information availability, the amendment places a duty on corporate debtor, its promoters or any other person associated with the management of the corporate debtor to provide the information in such format and time as sought by the resolution professional.

The amendment places a duty on the creditors to share information regarding the assets and liabilities of the corporate debtor, the financial statements and other relevant financial information from their records and available reports to help the resolution professional in preparation of the information memorandum and relevant extracts from the transaction or forensic audit reports to aid the resolution professional in preparation of the avoidance application.

The Amendment also addresses the issue of treatment of avoidance applications filed with the Adjudicating Authority after closure of the corporate insolvency resolution process (CIRP). It provides that the resolution plan shall provide for manner in which such applications will be pursued after the approval of the resolution plan and the manner in which the proceeds, if any, from such proceedings shall be distributed.

The amendment includes a definition of significant difference in valuations during CIRP and enables the committee of creditors to make a request to the resolution professional regarding the appointment of a third valuer.

The amended regulations are effective from today.

https://pib.gov.in/PressReleasePage.aspx?PRID=1834291

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insolvency grievance handling procedure

With a view to put in place, a streamlined and swift complaint handling procedure, the Insolvency and Bankruptcy Board of India notified the Insolvency and Bankruptcy Board of India (Grievance and Complaint Handling Procedure) (Amendment) Regulations, 2022 and the Insolvency and Bankruptcy Board of India (Inspection and Investigation) (Amendment) Regulations, 2022 to amend the Insolvency and Bankruptcy Board of India (Grievance and Complaint Handling Procedure) Regulations, 2017 and the Insolvency and Bankruptcy Board of India (Inspection and Investigation) Regulations, 2017.

The Insolvency and Bankruptcy Code, 2016 (Code) read with Insolvency and Bankruptcy Board of India (Grievance and Complaint Handling Procedure) Regulations, 2017 provide mechanism for redressal of complaints and grievances filed against insolvency professionals, insolvency professional agencies and information utilities. Further the Code read with Insolvency and Bankruptcy Board of India (Inspection and Investigation) Regulations, 2017 provide mechanism for carrying out inspections and investigations on insolvency professional agencies, insolvency professionals and information utilities and passing orders by Disciplinary Committee.

The mechanism of complaint/ grievance redressal and subsequent enforcement action has been amended to have expeditious redressal and also to avoid placing undue burden on the service providers. To curtail such delays and to ensure expeditious and result oriented enforcement mechanism, the Amendment Regulations provides for following:

  • Revisions in various timelines related to enforcement process provided in the (Grievance and Complaint Handling Procedure) Regulations, 2017 and (Inspection and Investigation) Regulations, 2017 for addressing the issue of delay in present mechanism.
  • Effective participation of IPAs in regulating the IPs through examination of grievances received against IPs.
  • Intimation to Committee of Creditor (CoC)/ Adjudicating Authority (AA) about the outcome of Disciplinary Committee (DC) order.

The Amendment Regulations are effective from 14th June, 2022

https://pib.gov.in/PressReleasePage.aspx?PRID=1834292

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voluntary liquidation process

https://pib.gov.in/PressReleasePage.aspx?PRID=1815070

The Insolvency and Bankruptcy Board of India notified the Insolvency and Bankruptcy Board of India (Voluntary Liquidation Process) (Amendment) Regulations, 2022 (Amendment Regulations) on 05th April, 2022.

The Insolvency and Bankruptcy Code, 2016 read with Insolvency and Bankruptcy Board of India (Voluntary Liquidation Process) Regulations, 2017 provide mechanism for voluntary liquidation of solvent corporate person. It has been noticed that there has been substantial delay in completion of voluntary liquidation process, though the process, in general, involve nil or negligible claims of creditors, fewer assets, if any, to be realized and few litigations, if any, to be concluded. To curtail such delay and ensure faster exit for firms, the Amendment Regulations modify timelines for some stipulated activities undertaken during the process as under:

  • The liquidator shall prepare the list of stakeholders within fifteen days (against the previously stipulated forty-five days) from the last date for receipt of claims, where no claim from creditors has been received till the last date for receipt of claims. 
  • The liquidator shall distribute the proceeds from realization within thirty days (against the previously stipulated six months) from the receipt of the amount to the stakeholders.
  • It has been further provided that the liquidator shall endeavour to complete the liquidation process of the corporate person within two hundred and seventy days from the liquidation commencement date, where the creditors have approved the resolution under section 59(3)(c) or regulation 3(1)(c), and ninety days from the liquidation commencement date in all other cases (against the previously stipulated 12 months in all situations). 

To provide summary of actions taken by the liquidator during the voluntary liquidation process, the Amendment Regulations specify a compliance certificate which is required to be submitted along with application under section 59(7) to the Adjudicating Authority, by the liquidator. It shall facilitate the Adjudicating Authority to adjudicate dissolution applications expeditiously. 

The Amendment Regulations are effective from 05th April, 2022. These are available at www.mca.gov.in and www.ibbi.gov.in.

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list of stakeholders

IBBI has vide its circular dated 24th November, 2021 decided to remove sensitive personal information such as aadhar no. from the details filed by the insolvency professionals of the list of stakeholders in a liquidation process.

Good to see at least one regulator taking pro-active measure to secure the privacy of individuals as aadhar no. being displayed in public domain is a serious breach of privacy and could lead to serious cyber crimes against the said individuals.

The salient features of the said circular is given below:

In pursuance of clause (d) of sub-regulation (5) of regulation 31 of the IBBI (Liquidation Process) Regulations, 2016 (‘Liquidation Process Regulations’) requiring the liquidator to file list of stakeholders on the electronic platform of the Board for dissemination on its website, the Board had issued the Circular No. IBBI/LIQ/40/2021 dated 04th March 2021 directing the liquidators to file the list of stakeholders and modification thereof, in the stipulated format, on the electronic platform, http://www.ibbi.gov.in.

  1. In the said format, the particular / column “Identification No.” for seeking identification details of stakeholders is mentioned. It has come to notice that in few instances, the details such as Aadhaar, PAN card, etc., are being filled therein. Such information being sensitive personal information is prone to misuse and not to be revealed on public platforms. The ‘General Guidelines for securing Identity information and Sensitive personal data or information in compliance to Aadhaar Act, 2016 and Information Technology Act, 2000’ issued by Ministry of Electronics and Information Technology provides that any personal identifiable data including Aadhaar should not be published in public domain.
  2. To address this problem, this Circular in partial modification of the Circular under reference, removes the column “Identification No.” from the particulars of the format stipulated therein. The insolvency professionals are directed to file the list of stakeholders of the respective corporate debtor under liquidation and modification thereof, in the revised format placed in Annexure, within three days of the preparation of the list or modification thereof, as the case may be. The rest of the contents of the above said Circular shall remain same.

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liquidation process

Insolvency and Bankruptcy Board of India (IBBI) has vide its circular dated 15th November, 2021 clarified that it is not necessary for Insolvency Professionals to expressly seek the No Objection Certificate or No Dues Certificate from Income Tax Department while the Voluntary Liquidation Process is going on.

It unnecessarily delays the process and defeats the very purpose of the Bankruptcy Code which is timely resolution of bankruptcies and liquidations. Every creditor is given a 30 day window in which to submit their claims to the Insolvency Professional and they i.e. the Income Tax office/ department stand in the same footing as the other creditors so there is ostensibly no need for special treatment to the revenue office.

Copy of the circular can be found here

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public notice of auction

IBBI has vide its circular dated 30th September, 2021 directed liquidators to post public notices of auction of assets of companies going under liquidation in the IBBI website as well i.e. http://www.ibbi.gov.in apart from publishing such notices in the newspapers as required under the regulations. This will make it like a central place to locate which assets are being offloaded and therefore it will be ease of business as well as possibly better price realisations.

Gist of circular is given below.

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monetary penalties on insolvency professionals

IBBI has vide their circular dated 28th July, 2021 standardised the monetary penalties to be levied on insolvency professionals for various violations or breaches carried out them. The salient features are given below.

This comes into force with immediate effect.

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insolvency professional agency

IBBI has vide its notification dated 27th April, 2021 amended the IBBI (Model Bye Laws and Governing Board of Insolvency Professional Agencies), Regulations as under:

Regulation 12A pertains to authorisation for assignment wherein the insolvency professional agency may on application by its professional member issue or renew its authorisation for assigment.

Sub Clause 5 says that if the authorisation for assignment is not issued, renewed or rejected by the Agency within 15 days of the date of receipt of the application by the agency, it is deemed that such authorisation is issued or renewed, as the case may be.

In view of the covid pandemic, this period of 15 days is extended to 30 days upto 31st October, 2021

Sub Clause 7 says that an order of rejection is passed, the aggrieved applicant may make an appeal to the Membership Committee within 7 days of the date of the order. This period of 7 days is extended to 15 days upto 31st October, 2021.

Copy of the notification can be found at the IBBI site. viz. http://www.ibbi.gov.in

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insolvency professionals

IBBI has vide its notification dated 27th April, 2021 amended the IBBI (Insolvency Professionals) Regulations 2016 as under:

  1. For the financial year 2020-21 and insolvency professional can pay his professional to IBBI by 30th June, 2021. Earlier it was to be paid by 30th April, 2021;
  2. When an individual resigns or joins an insolvency professional entity as a director or partner then the entity is now required to inform IBBI of the same within 30 days of such appointment/ resignation. Earlier the period was 7 days.
  3. The time limit for an insolvency professional entity to pay its annual fee to the Board for the financial year 2020-21 is 30th June, 2021, earlier it was 30th April, 2021.

These relaxations have been given in view of the ongoing covid pandemic raging through the country.

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committee of creditors

IBBI circular dated 16th April, 2021 on the subject of matters to be considered by the committee of creditors on request by members of the committee. Read on.

Regulation 18 of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations,
2016 (CIRP Regulations) provides that a resolution professional (RP) may convene a meeting
of the committee of creditors (CoC), when he considers it necessary. He shall, however,
convene a meeting of the CoC, if a request to that effect is made by members of the CoC
representing 33% of the voting rights.

  1. Regulation 19 of the CIRP Regulations requires a notice in writing for calling a meeting of
    the CoC. Regulation 21 requires that the notice for a meeting of the CoC shall contain a list of
    matters to be discussed, the list of issues to be voted, and copies of all documents relevant to
    the matters to be discussed and issues to be voted upon at the meeting.
  2. It is clear from a joint reading of the provisions of regulations 18, 19 and 21 of the CIRP
    Regulations that members of the CoC having 33% of the voting rights may request the RP to
    convene a meeting of the CoC. Such request shall include a note proposing the matters to be
    discussed or issues to be voted upon, along with relevant documents, if any. On receipt of the
    request, the RP shall convene a meeting of the CoC for consideration of the note. These
    provisions envisage the following situations:

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liquidation process

IBBI has vide its notification dated 4th March, 2021 amended the IBBI (Liquidation Process) Regulations, 2016 as follows:

Regulation 31 which pertains to list of stakeholders has been amended as follows:

Sub-regulation 2 has been substituted as follows:

“(2) The liquidator shall file the list of stakeholders with the Adjudicating Authority within forty-five days from the last date for receipt of the claims.”

The earlier clause read as follows:

(2) The liquidator shall file the list of stakeholders with the Adjudicating Authority within forty-five days from the last date for receipt of claims, and the filing of the list shall be announced to the public in the manner specified in Regulation 12(3).

The portion marked in bold has been deleted from the regulations.

New clause (d) has been inserted in sub- regulation (5) as follows:

“(d) filed on the electronic platform of the Board for dissemination on its website:
Provided that this clause shall apply to every liquidation process ongoing and commencing on or after the date of commencement of the Insolvency and Bankruptcy Board of India (Liquidation Process) (Amendment) Regulations, 2021.”;

Sub regulation (5) pertains to list of stakeholders, which shall be available for inspection for person who submitted proofs of claim, by members, partners, directors & guarantors of corporate debtor and to be displayed on the website of the corporate debtor.

Now this additional clause (d) has been added to the said sub-regulation (5) of regulation 31

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retention of records – corporate insolvency

The IBBI has issued a circular dated 4th January, 2021 wherein they have mandated the resolution professionals to retain all their records pertaining to the Corporation Insolvency Resolution Process for a minimum period of 8 years in electronic format and 3 years in physical form. Hitherto he was required to retain all records only for 3 years in physical form. Gist of circular follows.

The Insolvency and Bankruptcy Code, 2016 (Code) read with various Regulations require an insolvency professional (IP) to maintain several records in relation to the assignments conducted by him under the Code. Keeping in view the importance of such records, clause (g) of sub-regulation (2) of regulation 7 of the IBBI (Insolvency Professionals) Regulations, 2016 (IP Regulations) provides that the registration granted to an IP shall be subject to the condition that he maintains records of all assignments undertaken by him under the Code for at least three years from the completion of such assignment. Clause 19 of the Code of Conduct appended to the First Schedule to the IP Regulations mandates an IP must provide all records as may be
required by the Board or the insolvency professional agency (IPA) with which he is enrolled.

  1. Clause (a) of sub-regulation (4) of regulation 3 of the IBBI (Inspection and Investigation) Regulations, 2017 (Inspection Regulations) provides that the Board shall conduct inspection, inter alia, to ensure that the records are being maintained by an IP in the manner required under the relevant regulations. Sub-regulation (2) of regulations 4 and sub-regulation (2) of regulation 8 of the (Inspection Regulations) empower the Inspecting Authority / Investigating Authority to direct the IP to submit records, as may be required, and it is his duty to produce such records in his custody or control before such Authority.
  2. Regulation 39A of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 (CIRP Regulations) mandates the interim resolution professional (IRP) and the resolution professional (RP) to preserve a physical as well as an electronic copy of the records relating to the corporate insolvency resolution process (CIRP) of the corporate debtor (CD), as per the record retention schedule as communicated by the Board in consultation with IPAs.
  3. Keeping with the above, the Board, in consultation with the IPAs and IPs, directs as under:
    (i) An IP shall preserve copies of records generated in electronic form for a minimum period of eight years, from the date of completion of the CIRP or the conclusion of any proceeding relating to CIRP, before the Adjudicating Authority (AA), Appellate Authority or Court, or any matter pending with the Board, whichever is later.
    (ii) For records other than (i) above, the IP shall maintain copies for minimum period of three years in physical form, and for minimum period of eight years in electronic form, from the date of completion of the CIRP or the conclusion of any proceeding relating to CIRP, before the Adjudicating Authority (AA), Appellate Authority or Court, or any matter pending with the Board, whichever is later.
    (iii) An IP shall preserve the records at a secure place and ensure that unauthorised persons do not have access to the same. For example, he may store copies of records in electronic form with an Information Utility. Notwithstanding the place and manner of storage, the IP shall be under obligation to produce records as may be required under the Code and the Regulations.
    (iv) An IP shall preserve records relating to that period of a CIRP which he has handled, irrespective of the fact that he did not continue the assignment till its conclusion. For example, an IP served for three months as RP before he was replaced by another IP, who served till conclusion of the CIRP. The former shall preserve records relating to the first three months, and the latter shall preserve records relating to the balance period of the CIRP.
    (v) An IP, in the matter of a CIRP, shall preserve the following copies of records relating to/forming basis for:
    (a) his appointment as IRP or RP, including the terms of appointment;
    (b) handing over / taking over by him;
    (c) admission of CD into CIRP;
    (d) public announcement;
    (e) the constitution of CoC and CoC meetings;
    (f) claims, verification of claims, and list of creditors;
    (g) engagement of professionals, registered valuers, and insolvency professional entity, including work done, reports etc., submitted by them;
    (h) information memorandum;
    (i) all filings with the AA, Appellate Authority and their orders;
    (j) invitation, consideration and approval of resolution plan;
    (k) statutory filings with IBBI and IPA;
    (l) correspondence during the CIRP;
    (m)insolvency resolution process cost pertaining to CIRP;
    (n) avoidance transactions or fraudulent trading; and
    (o) any other records, which is required to give a complete account of the CIRP.

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