Tag Archives: insolvency professionals

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.

Leave a comment

Filed under insolvency law

Insolvency Professionals as Administrators

In a unique kind of collaboration between two regulators, SEBI and IBBI have agreed to use the service of Insolvency Professionals to act as Administrators to enforce the SEBI regulation passed in 2018 called as Securities and Exchange Board of India (Appointment of Administrator and Procedure for Refunding to the Investors) Regulations, 2018.

The brief role that the Administrator will play under these SEBI regulations are as under:

a. appointment of Administrator pursuant to failure to comply with disgorgement or refund orders passed by the Board;
b. sale of properties attached by the Recovery Officer of the Board under the Act;
c. collection of claim documents and verification of claims of investors for the purpose of effecting refunds;
d. refund of monies to the investors pursuant to disgorgement or refund orders passed by the Board;
e. recovery of disgorgement amounts directed by the Board;
f. any act incidental or connected thereto.

These are very wide powers given to Administrators under the regulations.

The brief gist of IBBI guideline for appointing Insolvency Professionals as Administrators are as under:

The IBBI and the SEBI have mutually agreed upon to use a Panel of IPs for appointment as Administrators for effective implementation of the Regulations. The IBBI shall prepare a Panel of IPs keeping in view the requirements of SEBI and the Regulations and the SEBIshall appoint
the IPs from the Panel as Administrators, as per its requirement in accordance with the Regulations. A Panel shall be valid for six months and a new Panel will replace the earlier Panel every six months. For example, the first panel under these Guidelines will be valid for appointments during April – September, 2020, the next panel will be valid for appointments
during October, 2020 – March, 2021 and so on.

  1. An IP will be eligible to be included in the Panel of the IPs if there is no disciplinary proceeding, whether initiated by the IBBI or the IPA of which he is a member, pending against him;
    b) he has not been convicted at any time in the last three years by a court of competent jurisdiction;
    c) he expresses his interest to be included in the Panel for the relevant period; and
    d) he undertakes to discharge the responsibility as an Administrator, as and when he may be appointed by the SEBI.
    e) he has made the compliance under Regulation 7(2) (ca) of the Insolvency and Bankruptcy Board of India (Insolvency Professionals) Regulations, 2016 for the year 2019-20.
    f) he holds an Authorisation for Assignment (AFA), which is valid on the date of expression of interest.

There are other conditions such as:

. It must be explicitly understood that an IP, who is included in the Panel based on his expression of interest, must not:
(a) withdraw his interest to act as an Administrator; or
(b) decline to act as Administrator, if appointed by SEBI; or
(c) surrender his registration to the IBBI or membership or AFA to his IPA; during the validity of the Panel; or

  1. It must also be explicitly understood that:
    a) an IP in the Panel will be appointed as Administrator, at the sole discretion of SEBI;
    b) the submission of expression of interest in accordance with these guidelines, is an unconditional consent by the IP to act as Administrator in accordance with the Regulations; and
    c) an IP who declines to act as Administrator, on being appointed by SEBI, shall not be included in the Panel for the next five years, without prejudice to any other action that may be taken by the IBBI.

The relevant IBBI notification can be found on the IBBI site https://www.ibbi.gov.in/

The relevant SEBI guidelines can be found here

https://www.sebi.gov.in/legal/regulations/oct-2018/securities-and-exchange-board-of-india-appointment-of-administrator-and-procedure-for-refunding-to-the-investors-regulations-2018_40621.html

Leave a comment

Filed under securities laws

insolvency for corporate persons

The Insolvency and Bankruptcy Board of India (IBBI) notified the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) (Fourth Amendment) Regulations, 2020 today.

The Insolvency and Bankruptcy Code, 2016 (Code) envisages appointment of an authorised representative (AR) by the Adjudicating Authority to represent financial creditors in a class, like allottees under a real estate project, in the committee of creditors. For this purpose, the Regulations require the interim resolution professional to offer a choice of three Insolvency Professionals (IP) in the public announcement, and the creditors in a class to choose one of them to act as their authorised representative. The amendment made to the Regulations today provides that the three IPs offered by the interim resolution professional must be from the State or Union Territory, which has the highest number of creditors in the class as per records of the corporate debtor. This will facilitate ease of coordination and communication between the AR and the creditors in the class he represents.

The Regulations currently envisage that the authorised representative shall seek voting instructions from creditors in a class at two stages, namely, (i) before the meeting; and (ii) after circulation of minutes of meeting. The amendment made to the Regulations today provides that the authorised representative shall seek voting instructions only after circulation of minutes of meeting and vote accordingly. He shall, however, circulate the agenda, and may seek preliminary views of creditors in the class before the meeting, to enable him to effectively participate in the meeting.

The Regulations provide that the committee of creditors shall evaluate all compliant resolution plans as per evaluation matrix to identify the best of them and may approve it. The amendment made to the Regulations today provides that after evaluation of all compliant resolution plans as per evaluation matrix, the committee of creditors shall vote on all compliant resolution plans simultaneously. The resolution plan, which receives the highest votes, but not less than sixty-six percent of voting share, shall be considered as approved.

The amendment Regulations are effective from today. These are available at www.mca.gov.in and www.ibbi.gov.in.

Leave a comment

Filed under insolvency law

insolvency professional

MCA has issued circular on 17th February, 2020 authorising the Insolvency Professional (Interim Resolution Professional or Resolution Professional or Liquidator) to file all the forms of a company after it has been admitted into the insolvency process.

Gist of circular follows:

Several requests have been received in the Ministry with respect to filing of documents in the MCA-2 1 registry where an Insolvency Professional (lnterim Resolution Professional (lRP) or Resolution Professional (RP) or Liquidator) has been appointed under IBC, 2016 in respect of a company. Keeping in view the requirements for statutory compliances by such companies under the Companies Act, 2013 and to enable compliance of such requirements by such Resolution Professionals, it is hereby clarified that the following procedures shall be followed in respect of all such cases:-

i) The IRP/ RP/ Liquidator would have to first file the NCLT order approving him as the IRP/RP/Liquidator in form INC-28 on the MCA21 portal by selecting the option “Others” at serial no. s(a)(i) from the drop down menu in the form. After filling in the form, the IRP/RP/Liquidator while affixing his DSC, shall choose his designation as “Others” in the declaration box.

ii) Jurisdictional ROC, shall thereafter examine and approve the INC-28 form so filed if the same is found to be in order. If the filed Form is not in order, he shall mark the form as under Re-submission / Rejected category as applicable. Once the INC-28 form is approved, only the IP (lRP/ RP/ Liquidator) shall thereafter be allowed to file any form on behalf of the company. For all subsequent filings, the IP shall choose his designation as “Chief Executive Officer”(CEO), for the purpose of filing e-forms, in various e-forms.

iii) The Master Data for the company shall, after the approval of Form No.INC28 clearly display that the said company is under CIRP or Liquidation, as the case may be, and the name of the IP so appointed shall be displayed in the CEO column.

iv) The IP shall be responsible and will be able to file all necessary documents/ disclosures/ returns for the purposes of compliances under the Companies Act. 2013.

v) For filing e-forms SH-8 and SH-9 and iXBRL, the IP shall be allowed to file the same in his role as CEO instead of the form being signed by two Directors. In respect of e-form MGT-7 the IP shall sign the form instead of a Director and thereafter the form would have to be certified by a Company Secretary in practice.

vi) Unless INC-28 e-form is approved, no other forms would be enabled for filing by the IRP/RP/Liquidator in his role of designated CEO. The IRP/RP/Liquidator in his role as designated CEO shall again file e-form INC-28 upon the approval of the resolution plan, initiation of liquidation proceedings or upon withdrawal of the application for CIRP based on which the status of the company would get suitably reflected in the company
master data.

vii) In case, a new Board is required to be appointed in terms of the order passed by the Tribunal or Appellate Tribunal, the details of the first authorised signatory of such board will be inserted by the jurisdictional Registrar after receiving an application from the IP, wherein the SRN of the relevant e-from INC-28 shall be quoted. Consequently, the authorisation for the IP to file documents on behalf of the company shall then cease and the new authorised signatory shall then take over the responsibility of filing e-forms on behalf of the company.

viii) lt is further clarified that in case the order of admission of a company (corporate Debtor) into CIRP or into liquidation is stayed or set aside by the Tribunal or Appellate Tribunal or other courts, such order shall be filed in Form INC-28 by the concerned IP, and the status of the company and the authorisation for filing of forms on behalf of company would then change accordingly.

Leave a comment

Filed under Uncategorized

Revamp of Bankruptcy Laws in India

PIB Press Release dated 4th November 2015

Summary of the Recommendations of the Bankruptcy Law Reforms Committee (BLRC)  

Following is the Summary of the Recommendations of the Bankruptcy Law Reforms Committee (BLRC)

The Report of the BLRC is in two parts:

  1. Rationale and Design/Recommendations;
  2. A comprehensive draft Insolvency and Bankruptcy Bill covering all entities.

The draft Bill has consolidated the existing laws relating to insolvency of companies, limited liability entities (including limited liability partnerships and other entities with limited liability), unlimited liability partnerships and individuals which are presently scattered in a number of legislations, into a single legislation. The committee has observed that the enactment of the proposed Bill will provide greater clarity in the law and facilitate the application of consistent and coherent provisions to different stakeholders affected by business failure or inability to pay debt and will address the challenges being faced at present for swift and effective bankruptcy resolution. The Bill seeks to improve the handling of conflicts between creditors and debtors, avoid destruction of value, distinguish malfeasance vis-a-vis business failure and clearly allocate losses in macroeconomic downturns.

The major recommendations of the Report are as follows:

  1. Insolvency Regulator: The Bill proposes to establish an Insolvency Regulator to exercise regulatory oversight over insolvency professionals, insolvency professional agencies and informational utilities.
  2. Insolvency Adjudicating Authority: The Adjudicating Authority will have the jurisdiction to hear and dispose of cases by or against the debtor. 
  1. The Debt Recovery Tribunal (“DRT”) shall be the Adjudicating Authority with jurisdiction over individuals and unlimited liability partnership firms. Appeals from the order of DRT shall lie to the Debt Recovery Appellate Tribunal (“DRAT”).
  1.  The National Company Law Tribunal (“NCLT”) shall be the Adjudicating Authority with jurisdiction over companies, limited liability entities. Appeals from the order of NCLT shall lie to the National Company Law Appellate Tribunal (“NCLAT”).
  2.  NCLAT shall be the appellate authority to hear appeals arising out of the orders       passed by the Regulator in respect of insolvency professionals or information utilities.

iii.                Insolvency Professionals: The draft Bill proposes to regulate insolvency professionals and insolvency professional agencies. Under Regulator’s oversight, these agencies will develop professional standards, codes of ethics and exercise a disciplinary role over errant members leading to the development of a competitive industry for insolvency professionals.

  1. Insolvency Information Utilities: The draft Bill proposes for information utilities which would collect, collate, authenticate and disseminate financial information from listed companies and financial and operational creditors of companies. An individual insolvency database is also proposed to be set up with the goal of providing information on insolvency status of individuals.
  2. Bankruptcy and Insolvency Processes for Companies and Limited Liability Entities: The draft Bill proposes to revamp the revival/re-organisation regime applicable to financially distressed companies and limited liability entities; and the insolvency related liquidation regime applicable to companies and limited liability entities.
  1. The draft Bill lays down a clear, coherent and speedy process for early identification of financial distress and revival of the companies and limited liability entities if the underlying business is found to be viable.
  2. The draft Bill prescribes a swift process and timeline of 180 days for dealing with applications for insolvency resolution. This can be extended for 90 days by the Adjudicating Authority only in exceptional cases. During insolvency resolution period (of 180/270 days), the management of the debtor is placed in the hands of an interim resolution professional/resolution professional.
  3. An insolvency resolution plan prepared by the resolution professional has to be approved by a majority of 75% of voting share of the financial creditors. Once the plan is approved, it would require sanction of the Adjudicating Authority. If an insolvency resolution plan is rejected, the Adjudicating Authority will make an order for the liquidation.
  4. The draft Bill also provides for a fast track insolvency resolution process which may be applicable to certain categories of entities. In such a case, the insolvency resolution process has to be completed within a period of 90 days from the trigger date. However, on request from the resolution professional based on the resolution passed by the committee of creditors, a one-time extension of 45 days can be granted by the Adjudicating Authority. The order of priorities [waterfall] in which the proceeds from the realisation of the assets of the entity are to be distributed to its creditors is also provided for.
  1.             Bankruptcy and Insolvency Processes for Individuals and Unlimited Liability Partnerships:The draft Bill also proposes an insolvency regime for individuals and unlimited liability partnerships also. As a precursor to a bankruptcy process, the draft Bill envisages two distinct processes under this Part, namely, Fresh Start and Insolvency Resolution.
  2.               In the Fresh Start process, indigent individuals with income and assets lesser than specified thresholds (annual gross income does not exceed Rs. 60,000 and aggregate value of assets does not exceed Rs.20,000) shall be eligible to apply for a discharge from their “qualifying debts” (i.e. debts which are liquidated, unsecured and not excluded debts and up to Rs.35,000). The resolution professional will investigate and prepare a final list of all qualifying debts within 180 days from the date of application. On the expiry of this period, the Adjudicating Authority will pass an order on discharging of the debtor from the qualifying debts and accord an opportunity to the debtor to start afresh, financially.
  1.             In the Insolvency Resolution Process, the creditors and the debtor will engage in negotiations to arrive at an agreeable repayment plan for composition of the debts and affairs of the debtor, supervised by a resolution professional.
  1. The bankruptcy of an individual can be initiated only after the failure of the resolution process. The bankruptcy trustee is responsible for administration of the estate of the bankrupt and for distribution of the proceeds on the basis of the priority.

vii.   Transition Provision: The draft Bill lays down a transition provision during which the Central Government shall exercise all the powers of the Regulator till the time the Regulator is established. This transition provision will enable quick starting of the process on the ground without waiting for the proposed institutional structure to develop.

      viii.             Transfer of proceedings: Any proceeding pending before the AAIFR or the BIFR under the SICA, 1985, immediately before the commencement of this law shall stand abated. However, a company in respect of which such proceeding stands abated may make a reference to Adjudicating Authority within 180 days from the commencement of this law

Leave a comment

Filed under Uncategorized