Home / Industry / Insolvency resolution plans should go beyond recast of liabilities: IBBI
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NEW DELHI: Insolvency resolution plans of businesses stitched together by committee of creditors should increase the value of the company over the years in a sustained way which needs strategies going beyond mere restructuring of liabilities, Insolvency and Bankruptcy Board of India (IBBI) has said.

In a message on its website, the bankruptcy rule maker said a resolution plan requires the committee of creditors to display great commercial wisdom.

“Such value maximisation with sustained resolution requires strategies much beyond restructuring of liabilities. This requires tremendous commercial dexterity and acumen on the part of members of the CoC," IBBI said.

The regulator also said that with responsibility comes accountability and since the decisions of the committee of creditors impact the life of a firm and consequently its stakeholders, it needs to be fair and transparent in its decisions.

IBBI’s views on the panel of creditors which decide on the future of a distressed company comes in the context of the efforts of policy makers to improve the outcome of bankruptcy resolution.

The committee of creditors has powers commensurate with its responsibilities, it said. Creditors can decide a haircut of any magnitude to any or all stakeholders required for rescuing the firm and to seek and choose the best resolution plan from the market, unlike other avenues that allow creditors to find a resolution only from existing promoters.

IBBI said a resolution plan can entail a change of management, technology, or product portfolio and acquisition or disposal of assets, businesses, or undertakings. It can also entail restructuring of the organisation, its business model or its ownership.

“Its decisions must increase the value of the firm, which is valued 100 at the commencement of the resolution process, to at least 101 the next year, 102 the year after, and so on," IBBI said. 

The regulator is in the process of building awareness about the role played by the committee of creditors as an institution of public faith and to build the capacity of institutional creditors to ensure that the committee discharges its statutory duties and responsibilities with utmost care and diligence

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