New Delhi: The government has notified the final regulations related to the insolvency resolution process under the Insolvency and Bankruptcy Code 2016.
With the notification issued on Wednesday, the Insolvency and Bankruptcy Board (IBBI) became operational on Thursday.
The IBBI, chaired by M.S. Sahoo, will act as the regulator of an ecosystem including insolvency professionals, agencies, and information utilities. The 10-member board, which, at present, has four ex-officio members, will soon appoint five more members, of which three will be full-time.
The corporate insolvency resolution process (CIRP) regulations notified on Wednesday are part of the rules notified to implement the bankruptcy code and in the process improve the ease of doing business.
Passed by the parliament in May, the bankruptcy law aims to improve the ease of doing business in India by facilitating smoother and time-bound settlement of insolvency and faster turnaround of businesses, apart from creating a database of serial defaulters.
The rules outline the duties of the insolvency resolution professionals. The resolution professional must appoint two registered valuers, who will determine liquidation value of a company—the estimated realisable value of the assets if the company was to be liquidated on the insolvency commencement date.
Whoever claims to be a creditor to the company must submit proof to back the claim.
In the absence of financial creditors, the rules mention setting up of a committee of creditors, consisting not more than 18 operational creditors that are owed the highest by value. The members will have voting rights in proportion to the money due to them.
The regulations enumerating the insolvency resolution process suggests a resolution plan prepared with the consent of a committee of creditors and the resolution professional which will be presented to the deciding authority for approval.
The board is likely to notify the last set of regulations pertaining to the liquidation process in the next week.
Regulations for insolvency professional agencies (IPAs) and insolvency professionals (IPs) were notified last week and came into force on Monday. The board has given registration to Institute of Chartered Accountants of India and Institute of Company Secretaries of India to function as IPAs, which will act as the regulators of IPs. It also registered 18 insolvency professionals enrolled with the agencies.
“The sections for appeal, trial by special court of criminal offences, and operational sections have been notified with the rules for insolvency resolution, which puts in place the structure for filing CIRP applications,” said Alok Dhir, managing partner at Dhir and Dhir Associates, a law firm.
He added that an operational insolvency board ensures a system in place to address insolvency cases, following the closure of board for industrial and financial reconstruction.