RECENT AMENDMENTS IN THE IBC CODE 2016
INSOLVENCY
AND BANKRUPTCY BOARD OF INDIA (INSOLVENCY RESOLUTION PROCESS FOR CORPORATE
PERSONS) (FOURTH AMENDMENT) REGULATIONS, 2018
On the 5th of October 2018, and by the
powers conferred by clause (t) of subsection (1) of section 196 read with
section 240 of the Insolvency and Bankruptcy Code, 2016 (31 of 2016), the
Insolvency and Bankruptcy Board of India made amendments to the Insolvency and
Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons)
Regulations, 2016 1, effective from 5th October 2018 onwards.
SUMMARY OF THE AMENDMENTS:-
1. ALTERED PRIORITY
OF PAYMENTS AND OMISSION OF DISSENTING FINANCIAL CREDITORS –
The reference to dissenting financial creditors
has been deleted from the Regulations.
Re-iterating the change in the
Regulation:-
“2 (1)(f) [“dissenting financial
creditor” means a financial creditor who voted against the resolution plan or
abstained from voting for the resolution plan, approved by the committee;]”
This has been omitted mainly because
of the fact that through amendment in Regulation 38 sub-regulation (1) it has
been stated that the
amount due to the operational creditors under a resolution plan shall be given
priority in payment over financial creditors. The Regulations earlier
provided payment of liquidation value to operational creditors and dissenting
financial creditors in priority.
Re-iterating the change in the
Regulation:-
“38 (1) A resolution plan shall
identify specific sources of funds that will be used to pay the –
(a) insolvency resolution process
costs and provide that the 49[ insolvency resolution process costs, to the
extent unpaid, will be paid] in priority to any other creditor;
(b) liquidation value due to
operational creditors and provide for such payment in priority to any financial
creditor which shall in any event be made before the expiry of thirty days
after the approval of a resolution plan by the Adjudicating Authority; and
(c) liquidation value due to
dissenting financial creditors and provide that such payment is made before any
recoveries are made by the financial creditors who voted in favour of the
resolution plan.”
“38 (1) The amount due to the operational creditors under a
resolution plan shall be given priority in payment over financial creditors.”
2. AMENDMENT IN THE
CONTENTS OF THE NOTICE OF THE MEETING –
The requirement to include a
statement that a vote of the members of the committee shall not be taken at the meeting unless all members are present at such meeting, has been done away with giving flexibility for the voting process.
Re-iterating the change in the Regulation:-
“21(3) The notice of the
meeting shall-
(a) contain an agenda of
the meeting with the following-
(i) a list of the matters
to be discussed at the meeting; (ii) a list of the issues to be voted upon at
the meeting; and (iii) copies of all documents relevant to the matters to be
discussed and the issues to be voted upon at the meeting; and
(b) state that a vote of
the members of the committee shall not be taken at the meeting unless all
members are present at such meeting.”
“21(3) The notice of the meeting shall contain
the following-
(i)
a list of the matters to be discussed
at the meeting;
(ii) a list of the issues to be voted upon at the
meeting;
(iii) and
( copies of all documents relevant to the matters to be discussed and the issues to be voted upon at the meeting.”
3. CIRCULATION OF
MINUTES OF THE MEETING TO AUTHORISED REPRESENTATIVES AS WELL -
The Regulations earlier required the
resolution professional to circulate the minutes of the meeting by electronic
means to all members of the committee of creditors within forty- eight hours of
the conclusion of the meeting and to seek a vote of the members who did not
vote at the meeting.
The amendment now requires the
resolution professional to circulate the minutes of the meeting by electronic
means to authorized representative(s) also. Moreover, through insertion of
sub-clause 6 in Regulation 25 It further requires the authorized representative
to circulate the minutes of the meeting received from the resolution professional
to the financial creditors in a class.
He shall announce the voting window
at least twenty-four hours before the window opens for voting instructions and
keep the voting window open for at least twelve hours.
This will enable a financial creditor
in a class, who could not vote on a matter before the meeting, to vote after
minutes of the meeting are circulated.
Re-iterating the change in the
Regulation:-
“25 (5) The
resolution professional shall-
(a) circulate the minutes of the
meeting by electronic means to all members of the committee within forty-eight
hours of the conclusion of the meeting; and
(b) seek a vote of the members who
did not vote at the meeting on the matters listed for voting, by electronic
voting system in accordance with regulation 26 where the voting shall be kept
open for twenty-four hours from the circulation of the minutes, for.”
“25 (5) The resolution
professional shall-
(a) circulate the minutes of the meeting by electronic means to all
members of the committee and the authorised representative, if any, within
forty-eight hours of the conclusion of the meeting; and
(b)
seek a vote of the members who did not vote at the meeting on the matters
listed for voting, by electronic voting system in accordance with regulation 26
where the voting shall be kept open for at least twenty-four hours from the
circulation of the minutes.
(6)
The authorised representative shall circulate the minutes of the meeting
received under sub-regulation (5) to creditors in a class and announce the
voting window at least twenty-four hours before the window opens for voting
instructions and keep the voting window open for at least twelve hours.”
4. VOTING MODALITY
FOR THE AUTHORISED REPRESENTATIVE –
By insertion of Regulation 26 sub
–clause 1A, it has been stated that the Authorised Representative shall
exercise the votes either by electronic means or through electronic voting
system as per the voting instructions received by him from the financial
creditors in the class pursuant to circulation of the minutes.
Re-iterating the change in the
Regulation:-
“(1A) The authorised representative
shall exercise the votes either by electronic means or through electronic
voting system as per the voting instructions received by him from the creditors
in the class pursuant to sub-regulation (6) of regulation 25.”
5. No requirement of the undertaking
by a prospective resolution applicant under
Regulation 39 –
The requirement of providing an undertaking by a prospective resolution applicant that he will provide for additional funds to the extent required has been omitted.
Re-iterating the change in the Regulation:-
“39 (1) (b) an
undertaking that it will provide for additional funds to the extent required
for the purposes under sub-regulation (1) of regulation 38”
In
turn the requirement of specifying the amounts payable from resources under the resolution plan for the purposes under sub-regulation (1) of regulation 38 by the committee has been omitted.
Re-iterating the change in the Regulation:-
“39 (3A) The
committee shall, while approving the resolution plan under sub- section (4) of
section (30), specify the amounts payable from resources under the resolution
plan for the purposes under sub-regulation (1) of regulation 38.]”
6. PRESERVATION OF RECORDS –
The regulations mandate the
resolution professional to preserve the physical and electronic copy of the
records relating to insolvency resolution process of the corporate debtor as
per the record retention schedule.
Re-iterating the change in the
Regulation:-
“39A. Preservation of records.-The interim resolution
professional or the resolution professional, as the case may be, shall preserve
a physical as well as an electronic copy of the records relating to corporate
insolvency resolution process of the corporate debtor as per the record
retention schedule as may be communicated by the Board in consultation with
Insolvency Professional Agencies.”
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