The Insolvency and Bankruptcy Board of India (IBBI) has said that its latest regulations on corporate rescue allow administrators and lenders of bankrupt firms to invite bids for individual assets of the distressed company.
- The Insolvency and Bankruptcy Board of India (IBBI) has amended the regulations with the “objective to maximise value in resolution“.
- IBBI will now allow administrators/lenders of bankrupt firms to invite bids for individual assets of the distressed company if they received no rescue plan for the entity as a whole the first time.
- This will ensure that better quality information about the insolvent company and its assets is available to the market, including prospective resolution applicants, in a timely manner.
- The amendment also makes it mandatory for Resolution Professionals to provide an opinion on whether the company has been subject to avoidance transactions within 75 days of the start of corporate insolvency resolution process.
- The Avoidance transactions are the financial deals done by a debtor, which put the creditors at a disadvantage or give preference to some creditors over others.
- Such provisions would allow stakeholders to claw back lost value and would disincentivise stakeholders from entering into such transactions.
About the ‘Insolvency and Bankruptcy Board of India’ –
- The Insolvency and Bankruptcy Board of India was established in October, 2016 under the Insolvency and Bankruptcy Code, 2016 (Code).
- The Bankruptcy Code consolidates and amends the laws relating to reorganisation and insolvency resolution of corporate persons, partnership firms and individuals in a time bound manner.
- The Code aims to promote entrepreneurship, availability of credit and balance the interests of all the stakeholders.
- IBBI is a unique regulator. It regulates a profession as well as processes.
- It has regulatory oversight over the Insolvency Professionals, Insolvency Professional Agencies, Insolvency Professional Entities and Information Utilities.
- It writes and enforces rules for processes, namely, corporate insolvency resolution, corporate liquidation, individual insolvency resolution and individual bankruptcy under the Code.
- Composition —
- IBBI is constituted by ten-member committee which includes —
- Three members from Central Government who cannot be below the rank of Joint Secretary or equivalent,
- One member is nominated by RBI (Reserve Bank of India) in this committee,
- Rest five members are nominated by Central Government.
- Powers & Functions —
- The IBBI has wide powers for administering the insolvency and bankruptcy regime in the country. These include —
- Registration of insolvency agencies and professionals,
- Levying fees from them,
- Specifying the regulations and standards for agencies and professionals,
- Monitoring and carrying out inspections and investigations on these entities etc.