To approve a Resolution Plan, the antecedents, credit worthiness and credibility including promoters, are taken into account by the Committee of Creditors.
Institutional arrangement for the new insolvency and bankruptcy regime.
Created as the refereeing institution - creation of regulations and control of agencies.
Established on October 1,2016 in accordance with the provisions of the Insolvency and Bankruptcy Code, 2016
Assisted by two advisory panels
Responsibility of IBBI
3 sets of regulations:
Regulations for Insolvency Professionals
Insolvency Agencies and Model Byelaws
Governing Board of Insolvency Professional Agencies
Create a framework for the voluntary liquidation of any corporate person- any company incorporated under the Companies Act and includes limited liability partnership or any other person incorporated with limited liability but does not include any financial service provider, which specify the procedure for:
Public announcement
Receipt and verification of claims of stakeholders
Reports and registers to be maintained and submitted by the liquidator
Realization of assets and distribution of proceeds to stakeholders
Distribution of residual assets
Finally dissolution of corporate person
Insolvency Professionals
Insolvency professionals include advocates, CA, CS and cost accountants meeting conditions set by IBBI.
Regarding Insolvency Professional Agencies, not-for-profit companies with a turnover of at least ₹ 10 crore can apply for Agency license.
Powers and Functions of IBBI
Registration of insolvency agencies and professionals
Levying fees from them
Specify regulations and standards for agencies and professionals
Monitor and carry out inspections and investigations on these entities
Structure of IBBI (10 members)
One Chairperson- MS Sahoo 1st Chairman of IBBI
Three members from Central Government officers not below the rank of Joint Secretary or equivalent.
One nominated member from the RBI.
Five members nominated by the Central Government; of these, three shall be whole-time members.
More than half of the directors of its board have to be independent directors.
📝 Need for New Regulation on Bankruptcy
Till now there were fragmented laws
Absence of a well-tailored corporate insolvency and bankruptcy regulation
IB Code provides basic legal framework to facilitate resolution process of companies this includes:
Legal foundation
Ecosystem or arrangements including a Bankruptcy Board
Insolvency Agencies and Insolvency Professionals etc. needed to make the Code effective
📝 New Regulations in October 2017
Amendments to the IBBI (Insolvency Resolution Process for Corporate Persons) Resolution Process, 2016 impose a greater responsibility on the Resolution Professionals and the Committee of Creditors in discharging their duties.
Now prior to approval of a Resolution Plan, the Resolution Applicants, including promoters, will be put to a stringent test with respect to their credit worthiness and credibility
Resolution Professionals must ensure that the Resolution Plan presented to the Committee of Creditors contains relevant details to assess the credibility of the Resolution Applicants.
Resolution Professionals must include details on Resolution Applicant in terms of:
Convictions
Disqualifications
Criminal proceedings
Categorization as willful defaulter as per RBI guidelines
Debarment imposed by SEBI, if any
Transaction, if any, with the Corporate Debtor in the last two years.
Transactions observed or determined, if any, covered under Section 43 (Preferential Transactions) ; Section 45 (Undervalued Transactions) ; Section 50 (Extortionate Credit Transactions) ; Section 66 (Fraudulent Transactions) under Insolvency and Bankruptcy Code, 2016
November 2017 Amendments
Tainted promoter in control of an entity that has been a non-performing asset to be disqualified from bidding the ailing entities for a “prescribed period”
Disqualifies a tainted promoter in control of an entity that has been a NPA for a “prescribed period” , which may be fixed at one year.
The government amended the law in less than a year to prevent promoters from acquiring the company at a steep discount, leaving banks with the pile of loans.
The ordinance also gives more powers to IBBI to prescribe eligibility norms for prospective bidders or resolution applicants in accordance with complexity and scale of operations of business of the ailing company.
Advantages of New Regulations
Resolution Applicants, including promoters, are put to a stringent test with respect to their credit worthiness and credibility.
Imposes greater responsibility on the Resolution Professionals and the Committee of Creditors in discharging their duties.
Focus Areas in News (Week 51 - 2017) !
📝 Companies Amendment Bill 2017
👌 List of 157 alien invasive animal species by ZSI (Prelims)
Losar Festival in Ladakh (Culture)
National Highways Investment Promotion Cell
📝 Methanol Economy Fund (Environment) - NITI Aayog