IBBI Proposes Overhaul of Insolvency Resolution Process

The Insolvency and Bankruptcy Board of India (IBBI) has proposed amendments aimed at enhancing the efficiencies of the Corporate Insolvency Resolution Process (CIRP). These measures, expected to benefit creditors and other stakeholders, involve improved valuation rules and streamlined processes for appointing valuers and representatives. Inputs from stakeholders are invited by July 10.

The Insolvency and Bankruptcy Board of India (IBBI) has laid out a series of amendments to the existing Insolvency Resolution Process for Corporate Process regulations, targeting enhanced efficiency and reduced costs. Stakeholder feedback is sought by July 10.

The proposed changes are set to boost the efficiency and transparency of the Corporate Insolvency Resolution Process (CIRP), ultimately benefiting creditors and stakeholders. One key proposal is for a registered valuer to submit a comprehensive valuation report for the corporate debtor, rather than separate valuations for different assets.

This shift aims to address inconsistencies between the CIRP regulations and the Companies (Registered Valuers and Valuation) Rules. Additionally, for companies with asset sizes up to Rs 1,000 crore and MSMEs, the proposal suggests appointing one registered valuer for estimating fair and liquidation values. If complexities arise, the Committee of Creditors can opt for two valuers, but reasons must be documented before proceeding.

This initiative will likely reduce costs and accelerate the process for smaller entities. The IBBI, operating under the Ministry of Corporate Affairs, has also invited inputs from corporate debtors, creditors, insolvency professionals, and the general public before finalising the amendments.

Other significant proposals include steps to prevent delays in the appointment of authorised representatives (AR) for creditors, enhancing their role in Committee of Creditors meetings upon application submission. The discussion paper also emphasizes that release of guarantees in the resolution plan will not nullify creditors' rights against guarantors.

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