Corporate Insolvency Resolution Process Simplified - Withdrawal of CIRP Application Permitted; Powers & Role of RP Clarified Further

Insolvency and Bankruptcy Board of India (“IBBI”) has amended the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 (“Regulations”) for the third time this year. Some of the new provisions brought in force by the IBBI (Insolvency Resolution Process for Corporate Persons) (Third Amendment) Regulations, 2018 (“Amendment Regulations”) are as follows:

  • The Amendment Regulations provide that in case a corporate debtor has classes of creditors (each class containingat least 10 creditors) then the resolution professional (“RP”) shall offer to every creditor of the class, a choice of 3 persons to act as the authorised representative of that class. The person, who is the choice of the highest number of creditors in a particular class, shall be appointed as the authorised representative of that class. The voting share of each creditor in this process shall be in proportion to the financial debt owed to him which includes an interest rate of 8% per annum unless a different rate has been agreed between the parties.
  • An application to withdrawthe corporate insolvency resolution process, may be submitted to the RP along with a bank guarantee towards estimated cost incurred under the process. The committee of creditors (“CoC”) shall consider the application within seven days of receipt of it. If the application is approved by the CoC, the RP shall submit the application to the Adjudicating Authority on behalf of the applicant, within 3 days of such approval.
  • A meeting of the CoC shall be called by giving at least 5 days’ notice in writing to every participant. The CoC, however, has the power to reduce the notice period from 5 days to 24 hours. The authorised representative shall circulate the agenda to creditors in a class and announce the period of voting at least 24 hours before the period of voting starts and keep the voting window open for at least 12 hours.
  • The RP shall form an opinion whether the corporate debtor has been subjected to certain transactions (preferential / undervalued / extortionate / fraudulent) by 75th day and make a determination of the same by 115th day after the commencement of insolvency.  Where the RP makes such a determination, he shall apply to the Adjudicating Authority for appropriate relief before ending of 135th day after the commencement of insolvency.
  • The RP shall publish an invitation for expression of interest (“EoI”) by the 75th day from the insolvency commencement date. The invitation shall specify the last date for submission of EoIalong with other details. Any EoI received after the specified time shall be rejected. The resolution professional shall conduct due diligence based on material on record and issue a provisional list of prospective resolution applicants within 10 days of the last date of submission of EoI. On considering objections to the provisional list, the resolution professional shall issue the final list of prospective resolution applicants, within 10 days of the last date for receipt of objections.
  • The RP shall issue the information memorandum, the evaluation matrix and the Request for Resolution Plans (“RFRP”) to the prospective resolution applicants and allow at least 30 days for submission of resolution plans. After submission of resolution plans by the resolution applicants, the CoC shall evaluate them as per the evaluation matrix to identify the best resolution plan and may approve it with the required majority. If approved by the CoC, the RP shall submit that resolution plan to the Adjudicating Authority at least 15 days before completion of the maximum period determined for completion of corporate insolvency resolution process, along with a compliance certificate.
  • The Amendment Regulations also provide for a model timeline of the corporate insolvency resolution process assuming that the interim resolution professional is appointed on the date of commencement of the process and the total time to be taken by him will be 180 days.