The Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 ("CIRP Regulations"), which provide for detailed provisions for effectively regulating the insolvency resolution process for corporate persons, have been amended vide the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) (Amendment) Regulations, 2024 ("Amendment Regulations"). These Amendment Regulations came into force on February 15, 2024.

We have outlined below the key modifications that have been introduced by the Amendment Regulations:

  1. Separate Bank Account for Real Estate Projects – A new Regulation 4D has been inserted to the CIRP Regulations relating to the corporate debtor who has any real estate project, and it has now been made mandatory for the interim resolution professional or the resolution professional ("RP") to maintain a separate bank account for each real estate project.
  1. Monthly Committee of Creditors (CoC) Meetings – The CIRP Regulations provided that the RP may convene a meeting of the CoC as and when he thought necessary1. However, under the Amendment Regulations, such meeting of the CoC is required to be conducted at least once in every 30 (thirty) days. The CoC has been given the liberty to decide to extend the interval between such meetings. However, at least 1 (one) meeting shall be conducted in each quarter.
  1. Voting by the CoC – The CIRP Regulations required the RP to seek (by electronic voting system), vote of the members of the CoC, who did not vote at the meeting on the matters listed for voting, and such voting was required to be kept open for at least 24 (twenty four) hours from the circulation of the minutes2. The Amendment Regulations have now given power to the CoC to decide the duration of this voting window and the same shall be between 24 (twenty four) hours to 7 (seven) days. Further, the RP has been restricted from extending the voting window where the matters listed for voting have already received the requisite majority and 1 (one) extension of 24 (twenty four) hours has been granted after the receipt of requisite majority vote.
  1. Approval of CoC for Insolvency Resolution Process Costs – A new Regulation 31B has been introduced which requires the insolvency professional to place, in each meeting of the CoC, the operational status of the corporate debtor and seek its approval for all costs, which are part of the insolvency resolution process costs.
  1. Disclosure of Valuation Methodology by Registered Valuers – The CIRP Regulations require submission to the RP by 2 (two) registered valuers of an estimate of the fair value and of the liquidation value computed in accordance with internationally accepted valuation standards, after physical verification of the inventory and fixed assets of the corporate debtor3. With an aim to increase transparency and reduce disputes over valuation related issues, the Amendment Regulations have inserted a proviso which requires the RP to facilitate a meeting in which such registered valuers will explain the methodology being adopted to arrive at valuation to the members of the CoC, before computation of estimates.
  1. Disclosure of Valuation Report – After receiving the resolution plans, the RP is required to provide the fair value and the liquidation value to every member of the CoC in electronic form. The members are required to give an undertaking to the effect that they shall maintain confidentiality of the fair value and the liquidation value and will not use such values to cause an undue gain or undue loss to itself or any other person4. The Amendment Regulations have brought 'valuation report' under the ambit of this Regulation and require the members to keep the valuation report confidential and to not use the information contained in the valuation report to cause an undue gain or undue loss to itself or any other person.
  1. Disclosure of Fair Value in the Information Memorandum – Under the CIRP Regulations, the RP is required to submit the information memorandum containing details of the corporate debtors such as – assets and liabilities, annual financial statements, creditors' list, debt particulars, details of guarantees, details of litigation, number of workers and employees, company overview, etc. – in electronic form, to each member of the CoC within 95 (ninety five) days of the insolvency commencement date5. By way of the Amendment Regulations, fair value has also been made a part of the information memorandum although the CoC has been granted the liberty to not disclose the fair value if it considers such non-disclosure to be beneficial for the resolution process, provided that the reasons are recorded in writing.
  1. Invitation for Expression of Interest for Real Estate Projects – The CIRP Regulations require the RP to publish brief particulars of the invitation for expression of interest within 60 (sixty) days from the insolvency commencement date, from interested and eligible prospective resolution applicants to submit resolution plans6. The Amendment Regulations have added a clarification stating that subject to the approval of the CoC, the RP may invite a resolution plan for each real estate project or group of projects of the corporate debtor.
  1. Monitoring Committee for Resolution Plan Implementation – While the CIRP Regulations provided for the amount payable under a resolution plan and the contents of the resolution plan7, the Amendment Regulations have inserted provisions relating to a monitoring committee for the implementation of the resolution plan, and if the CoC considers that such monitoring committee is required, it has been given the power to constitute the same with the RP or propose another insolvency professional or any other person as its members. If the RP is made a member of the monitoring committee, the monthly fee payable to him shall not be more than the monthly fee received by him during the corporate insolvency resolution process.
  1. Continuation of the Resolution Process during Extension Application – The CIRP Regulations provide that the CoC may instruct the RP to make an application to the adjudicating authority to extend the insolvency resolution process period and the RP shall make the application upon such instruction from the CoC8. Clarification has been added vide the Amendment Regulations wherein the RP is to discharge his responsibilities under the corporate insolvency resolution process on a continuous basis, till the application for extension is decided by the adjudicating authority.

Footnotes

1. Regulation 18 of the CIRP Regulations.

2. Regulation 25(5) of the CIRP regulations.

3. Regulation 35(1) of the CIRP Regulations.

4. Regulation 35(2) of the CIRP Regulations.

5. Regulation 36(2) of the CIRP Regulations.

6. Regulation 36A(1) of the CIRP Regulations.

7. Regulation 38 of the CIRP Regulations.

8. Regulation 40 of the CIRP Regulations.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.