IBBI proposes revamp of voting on bids for bankrupt companies
IBBI explained that it will make changes to its regulations after examining public comments received, for which it has given time till 27 June.
PremiumNew Delhi: Insolvency and Bankruptcy Board of India (IBBI) has proposed a series of changes to its regulations including a new voting method on bids from investors for bankrupt companies which allows creditors to rank their preferences rather than merely voting in favour or against bids.
The move helps when more than one investor proposal to bail out a distressed business is put to vote at the same time. IBBI has also proposed to give more flexibility for creditors to come up with their claims after a company is admitted into bankruptcy proceedings so that creditors who missed the 90 day window to submit their claims need not go to tribunals to secure an exemption.
In the discussion paper brought out on Wednesday, IBBI proposed that the representative of home buyers sitting in committees of creditors of distressed real estate developers will have a greater role to play in making debt resolution a success. The discussion paper makes it clear that the authorised representative of home buyers have to ensure that the technical matters discussed among creditors are clearly understood by home buyers so that they can take an informed decision.
Also, these representatives have to help the insolvency resolution professional running the bankrupt business to increase the marketability of the assets of the company. "An authorised representative's involvement can be valuable in enhancing the marketability of the corporate debtor's assets," the discussion paper said.
IBBI explained that it will make changes to its regulations after examining public comments received, for which it has given time till 27 June.
While proposing to revamp the voting method to suit situations where there are more than one resolution plan, IBBI said that the current voting framework does not offer a system for creditors to elicit their preferences on these plans. The bankruptcy code prescribes that all debt resolution plans meeting the norms have to be placed before financial creditors for approval by vote of not less than 66%.
The regulator noted that in real estate cases, it occurs that the real estate allottees vote in favour of all available plans in order to ensure that they are not dissenting creditor and that the developer does not end in liquidation, as liquidation leaves the real estate allottees with no relief.
The proposal is to let creditors to vote on resolution plans by showing their preference. As per this, all plans will be considered on the basis of preference accorded to them and if none gets 66% of votes, the one with least first preference votes will be eliminated and its first preference is allotted to the plan that was accorded the second preference. Such elimination could result in finding the one most preferred by the creditors among those meeting the voting threshold. If no plan meets the voting threshold, it is taken that creditors have not approved any resolution plan, IBBI explained in the document.
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