Insolvency board seeks fairer, quicker process – Times of India

MUMBAI: The Insolvency and Bankruptcy Board of India (IBBI) has proposed major changes in the insolvency process to bring more discipline and transparency and to address issues that have come up in recent cases.
The IBBI, which regulates both insolvency professionals and the process, has sought public views on amendments by September 17.
A key development is the introduction of a code of conduct for the committee of creditors (CoC) proposed by a parliamentary standing committee headed by Jayant Sinha.
The 31-point code of conduct, among other things, requires creditors to disclose any conflict of interest, maintain full confidentiality and not try to adjust funds of the corporate debtor against their dues during the resolution process. However, it does not mention how violations in the code will be addressed.

Some of the proposed amendments are based on observation of the tribunals in various cases. The discussion paper seeks to cap revisions in bids to two times. This will prevent delay on account of multiple bid revisions, which was seen in some cases.
Also, unsolicited bids have been expressly banned, which will save lenders from an awkward situation like in the DHFL resolution. The CoC has been empowered to decide on the timeframe and thresholds for improvement on the resolution plan in advance.
“The proposed changes to IBC regulations pertaining to both resolution and liquidation are timely and intend to plug the loopholes, which are affecting the timelines and value-maximisation. The measures also aim to bring in greater accountability and transparency in the conduct of key stakeholders driving the process,” said UV Asset Reconstruction Company director Hari Hara Mishra.
The ‘Swiss challenge’ sale process, which has worked well, has been proposed as a standard for both the resolution as well as liquidation processes. In this process, bidders get an opportunity to better the highest bid. Once the bids are received, the original bidder has the right of refusal for the best price.
In a separate paper on the liquidation process, the board has proposed that more powers be given to the stakeholder’s consultative committee.
Besides, the board plans to ban liquidators from appointing commission agents in the sale of assets. The changes come even as the government is proposing to amend the Act by introducing a pre-packaged insolvency resolution (PIRP) for small businesses.
“Under this Bill, even after the PIRP is initiated, the management or the partners of the corporate debtor retain control on the company and the affairs, except in cases of fraud or mismanagement. This will ensure that the autonomy of the management is retained, and will, in turn, promote businesses to grow in India,” said DSK Legal partner Samir Malik. This is unlike the process for corporates where promoters are banned under Section 29A of the Act.