IBBI amendments

PIB press release dated 27th July, 2019

The Insolvency and Bankruptcy Board of India (IBBI) notified the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) (Amendment) Regulations, 2019 and the Insolvency and Bankruptcy Board of India (Liquidation Process) (Amendment) Regulations, 2019 today.

The salient amendments affected by the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) (Amendment) Regulations, 2019 are:

(a) The amendments specify the process for withdrawal of applications before constitution of committee of creditors (CoC), after constitution of CoC but before issue of invitation for expression of interest, and after issue of invitation for expression of interest.

(b) The amendments require that while approving a resolution plan or deciding to liquidate the corporate debtor, the CoC may:

(i) approve a plan providing for contribution for meeting the liquidation costs, 

(ii) recommend sale of the corporate debtor or sale of business of the corporate debtor as a going concern, and

(iii) fix, in consultation with the RP, the fee payable to the liquidator, if an order for liquidation is passed by the Adjudicating Authority.

The salient amendments affected by the Insolvency and Bankruptcy Board of India (Liquidation Process) (Amendment) Regulations, 2019 are:

(i) The amendments specify the process for (i) sale of corporate debtor as going concern, and (ii) sale of business of corporate debtor as going concern under liquidation. These also provide that where a corporate debtor is sold as a going concern, the liquidation process shall be closed without dissolution of the corporate debtor.

(ii) The amendments require completion of liquidation process within one year of its commencement, notwithstanding pendency of applications for avoidance transactions. These provide a model timeline for each task in the liquidation process. It also specifies a maximum time of 90 days from the order of liquidation for completion of compromise or arrangement, if any, proposed by the stakeholders under section 230 of the Companies Act, 2013. These will ensure that liquidation process is closed at the earliest.

(iii) The amendments require the financial creditors, who are financial institutions, to contribute towards the liquidation cost, where the corporate debtor does not have adequate liquid resources to complete liquidation, in proportion to the financial debts owed to them by the corporate debtor, in case the CoC did not approve a plan for such contribution during corporate insolvency resolution process.  However, such contribution along with interest at bank rate thereon shall form part of liquidation cost, which is paid in priority.

(iv) The amendments provide for constitution of a Stakeholders’ Consultation Committee having representation from secured financial creditors, unsecured financial creditors, workmen and employees, government, other operational creditors, and shareholder/partners to advice the liquidator on matters relating to sale. However, the advice of this committee is not binding on the liquidator.

(v) The amendments require that a stakeholder may submit its claim or update its claim submitted during the corporate insolvency resolution process, as on the liquidation commencement date. Along with submission of claim, a secured creditor shall inform the liquidator of its decision to relinquish its security interest to liquidation estate or to realise its security interest.

(vi) The amendments have introduced a comprehensive compliance certificate to be submitted along with the final report to the Adjudicating Authority.

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

Insolvency Code Amendment

MCA press release dated 17th july, 2019


The Union Cabinet today approved the proposal to introduce a Bill in the Parliament to carry out 08 amendments to the Insolvency and Bankruptcy Code, 2016. The amendments aim to fill critical gaps in the corporate insolvency resolution framework as enshrined in the Code, while simultaneously maximizing value from the Corporate Insolvency Resolution Process (CIRP).

2. The Government intends to ensure maximization of value of a corporate debtor as a going concern while simultaneously adhering to strict timelines.

3. The salient features of the amendments are:

a) Clarity on allowing comprehensive corporate restructuring schemes such as mergers, demergers, amalgamations etc as part of the resolution plan.
b) Greater emphasis on the need for time bound disposal at application stage.
c) A deadline for completion of CIRP within an overall limit of 330 days, including litigation and other judicial processes.
d) Votes of all financial creditors covered under section 21(6A) shall be cast in accordance with the decision approved by the highest voting share (more than 50%) of financial creditors on present and voting basis.
e) A specific provision that financial creditors who have not voted in favor of the resolution plan and operational creditors shall receive at least the amount that would have been received by them if the amount to be distributed under the resolution plan had been distributed in accordance with section 53 of the Code or the amount that would have been received if the liquidation value of the corporate debtor had been distributed in accordance with section 53 of the Code, whichever is higher. This will have retrospective effect where the resolution plan has not attained finality or has been appealed against.
f) Inclusion of commercial consideration in the manner of distribution proposed in resolution plan, within the powers of the Committee of Creditors.
g) Clarity that the plan shall be binding on the all stakeholders including the Central Government, any State Government or local authority to whom a debt in respect of the payment of the dues may be owed.
h) Clarity that the Committee of Creditors may take the decision to liquidate the corporate debtor, any time after constitution of the Committee of Creditors and before preparation of Information Memorandum.

5. The changes are expected to lead to timely admission of applications and timely completion of the Corporate Insolvency Resolution Process, greater clarity on permissibility of corporate restructuring schemes, manner of distribution of amounts amongst financial and operational creditors, clarity on rights and duties of authorized representatives of voters and applicability of the resolution plan on all statutory authorities. 6. Analysis of data available demonstrates that there

External Commercial Borrowings

RBI has vide its notification dated 7th February, 2019 allowed companies who are underoing the insolvency process to raise external commercial borrowings to repay rupee loans on approval basis. The gist of RBI notification is given below:

2. In terms of paragraph 2.1.(viii) of the Annex to the A.P. (DIR Series) Circular No. 17, dated January 16, 2019 on “External Commercial Borrowings (ECB) Policy – New ECB Framework”, ECB proceeds cannot be utilised for repayment of domestic Rupee loans, except when the ECB is availed from a Foreign Equity Holder as defined in the aforesaid framework.

3. On a review it has been decided, in consultation with the Government of India, to relax the end-use restrictions for resolution applicants under the Corporate Insolvency Resolution Process (CIRP) and allow them to raise ECBs from the recognised lenders, except the branches/ overseas subsidiaries of Indian banks, for repayment of Rupee term loans of the target company under the approval route. Accordingly the resolution applicants, who are otherwise eligible borrowers, can forward such proposals to raise ECBs, through their AD bank, to Foreign Exchange Department, Central Office, Mumbai of the Reserve Bank for approval.

4. All other provisions of the ECB policy remain unchanged. AD Category - I banks should bring the contents of this circular to the notice of their constituents and customers. The amended ECB policy will come into force with immediate effect.

The RBI notification can be viewed here