IBBI amends regulations to increase value of stressed cos undergoing insolvency

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In a move that will provide better market-related solutions for struggling businesses, watchdog IBBI has changed its regulations to allow the sale of one or more assets of an entity undergoing insolvency resolution proceedings, along with other changes.

Also, the Creditors’ Committee (CoC) can now examine whether a compromise or an arrangement can be explored for a debtor company during the liquidation period.

The Insolvency and Bankruptcy Board of India (IBBI) amended the regulations with the aim of “maximizing the value of resolution” and it came into force on September 16.

No less than 1,703 corporate insolvency resolution processes (CIRPs) ended up in liquidation until the end of June this year.

The regulator has authorized a resolution professional and the CoC to seek the sale of one or more assets of the debtor company concerned in cases where there are no resolution plans for the whole company.

The Insolvency and Bankruptcy Code (IBC) provides for market-related, time-limited resolution of distressed assets.

The amended regulations will also allow a “resolution plan to include the sale of one or more CD (debtor company) assets to one or more resolution applicants who successfully submit resolution plans for those assets and provide for a appropriate treatment of remaining assets”.

With the changes to the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, marketing of a corporate debtor’s assets can be carried out, which will contribute to wider dissemination of information to a wider and targeted audience. potential candidates for resolution.

“The amendment also allows for a longer time for the asset to be on the market…” IBBI said.

Gaurav Gupte, Partner, Cyril Amarchand Mangaldas, said the changes will give impetus to better market-driven solutions for insolvency resolution.

“The amendments will ensure that better information about the insolvent company and its assets is available to the market, including potential candidates for resolution, in a timely manner,” he added.

According to him, a resolution professional will have to actively seek claims from known creditors (based on the books of accounts) of the company concerned, a step which will help to make available a clearer picture of the debt.

“Details of all requests filed to avoid transactions will be made available to resolution applicants prior to the submission of resolution plans and may be addressed by applicants in their plans.

“Third, the information memorandum should contain material information that will help assess its position as a going concern, not just information about its assets, thereby addressing a critical market need,” he said. he adds.

According to IBBI’s April-June newsletter, no less than 1,703 corporate insolvency resolution processes (CIRPs) resulted in winding-up orders up to the end of June this year. .

These processes took an average of 428 days to complete.

These cases had an aggregate claim of Rs 8.19 lakh crore but their assets, on the ground, were only valued at Rs 0.59 lakh crore.

“Up to June 2022, 374 CDs have been completely liquidated…These 374 CDs together had outstanding claims of Rs 71,766.03 crore, but assets valued at Rs 3,046.17 crore. Rs 2,936.30 crore were realized through the liquidation of these companies,” the newsletter said.

(Only the title and image of this report may have been edited by Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)

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