Changes proposed in Corporate Insolvency Resolution

Changes proposed in Corporate Insolvency Resolution

The Ministry of Corporate Affairs invites public opinion on changes under the Insolvency and Bankruptcy Code

The Ministry of Corporate Affairs has sought public opinion on the proposed changes to the Corporate Insolvency Resolution (CIR) and Liquidation Framework under the Insolvency and Bankruptcy Code (IBC).

Based on the issues raised in the ILC and from various stakeholder consultations, various changes were proposed to the code to further its objectives of time-bound resolution of stressed assets while maximizing its value and balancing the interests of all stakeholders.

It was proposed that financial creditors, as prescribed by the Government of India, might be required to submit only Information Utility (IU) authenticated records to establish default for the purpose of admission of a Corporate Insolvency Resolution Process (CIRP) application.

In case, such records were not available, and for all other financial creditors, current options of relying on different documents for establishing default for admission of an application would remain available.

This would make the admission process significantly quicker and less cumbersome. Consequently, the adjudicating authority (AA) would only be required to consider IU authenticated records as evidence.

The ministry proposed, "The code may be amended to provide that the resolution plan should mandatorily specify the manner of undertaking proceedings for avoidance of transactions and wrongful trading if such proceedings are to be continued after approval of the plan."

"The plan may also be required to specify if the resolution professional would pursue such transactions/trading or if any other person would do so after the approval of the plan," it added.

The code should provide a fixed time period for approval or rejection of a resolution plan by the AA. The AA would be given 30 days for approving or rejecting a resolution plan. If not done within the time frame, he would cite reasons for it.