BackIBBI seeks public comments on committee of creditors conduct, insolvency resolution process
The IBBI discussion paper proposes a code of conduct for committee of creditors; restrictions on request for resolution plans and use of swiss challenge; and treatment of live bank guarantees and line of credit as claims
PremiumInsolvency and Bankruptcy Board of India (IBBI) has invited public comments on a discussion paper on issued related to corporate insolvency resolution process (CIRP).
Released Friday, the discussion paper proposes a code of conduct for committee of creditors (CoC); restrictions on request for resolution plans and use of swiss challenge; and treatment of live bank guarantees and line of credit as claims. The proposals are meant to bring more transparency in the insolvency resolution process.
Since the decisions of the CoC impact the life of the firm and consequently its stakeholders, it needs to be fair and transparent in its decisions. Such power should come with accountability, IBBI said in the discussion paper.
"Specifying a code of conduct will promote transparent working of the CoC and make participating members accountable for their actions during the process. Any attempt by members of CoC to make favourable decision in the interest of any particular (group of) stakeholder(s) would be avoided, thereby ensuring that the principle of fairness is met," it noted.
Further, IBBI said the code of conduct would also promote higher responsibility to make decisions in the interest of all stakeholders instead of their own self interests.
"The Board proposes to put in place a code of conduct for CoC that shall elevate accountability and responsibility of CoC to ensure transparency in the functioning of a CoC... the proposed code of conduct establishes broad principles that can be applied to every situation.
"It also draws from the ethical norms on which a CoC is expected to function and shall act as the guiding light for the CoC while conducting itself," it noted.
Another proposal is with respect to use of Swiss challenge method for bidders. Under this system, a bidder (original bidder) makes an unsolicited bid to the auctioneer. Once approved, the auctioneer then seeks counter proposals against the original bidder's proposal and chooses the best amongst all options.
The deadline for submitting the public comments is September 17.
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