IBBI AMENDS REGULATIONS FOR INSOLVENCY RESOLUTION PROCESS

IBBI AMENDS REGULATIONS FOR INSOLVENCY RESOLUTION PROCESS

FAIR VALUE AND LIQUIDATION VALUE

Insolvency resolution professionals will now be required to assess the fair value and liquidation value of the entity undergoing insolvency proceedings, with the latest set of amendments to the regulations.

The Insolvency and Bankruptcy Board of India (IBBI) has amended the norms pertaining to insolvency resolution process for corporate persons.

RESOLUTION PLAN

Under the revised framework, the resolution plan -- approved by the committee of creditors -- should be submitted to the adjudicating authority "at least 15 days before the expiry of the maximum period permitted for the completion of the corporate insolvency resolution process".

An official release today said the norms have been amended wherein the resolution professional should appoint two registered Valuers to determine the fair value and the liquidation value of the corporate debtor.

COMMITTEE OF CREDITORS

"After the receipt of resolution plans, the resolution professional shall provide the fair value and the liquidation value to each member of the committee of creditors in electronic form, on receiving a confidentiality undertaking," it said.

"It would help in better price discovery for assets of corporate debtor in the process of insolvency resolution,".

INFORMATION MEMORANDUM

According to the release, the resolution professional should submit the information memorandum in electronic form to each member of the committee of creditors within two weeks of appointment.

Once an invitation, including the evaluation matrix, is issued to a prospective resolution applicant, the latter would have a minimum of 30 days to submit the resolution plan.

The resolution applicant would continue to specify the sources of funds that would be used to pay insolvency resolution process costs, liquidation value due to operational creditors and liquidation value due to dissenting financial creditors, the release said.

However, the committee of creditors would specify the amounts payable from resources under the resolution plan for these purposes, it added.

"A resolution plan shall provide for the measures, as may be necessary, for insolvency resolution of the corporate debtor for maximisation of value of its assets.

"These may include reduction in the amount payable to the creditors, extension of a maturity date or a change in interest rate or other terms of a debt due from the corporate debtor, change in portfolio of goods or services produced or rendered by the corporate debtor and change in technology used by the corporate debtor," the release said.

"As liquidation value resulted in the estimated realizable value based on the piecemeal sale of assets if the corporate debtor were to be liquidated on the insolvency commencement date, it often resulted in a base value of the Assets of the corporate debtor,"

The fair value is to be arrived on going concern premise and is under a willing buyer willing seller concept.