IBBI Strengthens its Due Diligence Framework under the Code

November 08, 2017

The Insolvency and Bankruptcy Board of India (IBBI) yesterday has effected amendments to the IBBI (Insolvency Resolution Process for Corporate Persons) Resolution Process, 2016 to impose a greater responsibility on the Resolution Professionals and the Committee of Creditors in discharging their duties.

Key highlights of the amendment:

  • 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;
  • Ensure that as part of due diligence, prior to approval of a Resolution Plan, the antecedents, credit worthiness and credibility of a Resolution Applicant, including promoters, are taken into account by the Committee of Creditors.
  • To ensure that the Corporate Insolvency Resolution Process results in a credible and viable Resolution Plan.
  • The Revised Regulations make it incumbent upon the Resolution Professional to ensure that the Resolution Plan presented to the Committee of Creditors contains relevant details to assess the credibility of the Resolution Applicants.
  • The details to be provided would include details with respect to the Resolution Applicant in terms of convictions, disqualifications, criminal proceedings, categorization as willful defaulter as per RBI guidelines, debarment imposed by SEBI, if any, and transaction, if any, with the Corporate Debtor in the last two years.

Hence, the amended regulations impose a greater responsibility on the Resolution Professionals and the Committee of Creditors in discharging their duties.

IBBI amends IBBI (Fast Track Insolvency Resolution Process for Corporate Persons) Regulations, 2017

The IBBI yesterday also issued Notification amending the IBBI (Fast Track Insolvency Resolution Process for Corporate Persons) Regulations, 2017. Rule 37 of the Regulations which provide for the mandatory content under the Resolution Plan has been amended. New Regulation Rule 37(3) has been incorporated which enlists the details required to be mentioned in the resolution plan to enable the committee to assess the credibility of such applicant and other connected persons to take a prudent decision while considering the resolution plan for its approval.  

Additionally, Rule 38(2) has been amended to provide that the resolution professional while submitting the plan to the Committee for approval shall also provide details of the transactions like preferential transactions, undervalued transactions, extortionate credit transactions and fraudulent transactions (if any).

IBBI’s notification can be amendments can be accessed here.

About the Author

Shilpi Sharan

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Shilpi Sharan is the Editor at Vakilno1.com – an Advocate with extensive knowledge in myriad fields of Law. She has a flair of writing and has legal publications in national and international law magazines to her credit. She focuses on legal research and aims at raising public awareness of laws in India.