The Insolvency and Bankruptcy Board of India has amended the Insolvency Resolution Process for Corporate Persons- the IBBI Regulations, 2018, to fix a time frame for identifying resolution applicants. As the amended regulation makes it mandatory to identify the applicants by the 105th day, it is said that the resolution process can be completed in a timely manner within the stipulated 180 days. There is no deadline currently, by when resolution applicants have to be identified.
The identification process and criteria keep changing till the far end of the resolution period generally, which leads to delays in completion of the entire process. “The amendment means bids must be invited under section 25 much before the 105th day,” said KS Ravichandran of KSR & Co Company Secretaries. Founder of legal firm Monish Panda & Associates, Monish Panda said, “Hopefully, the new amendment will ensure timely completion of the resolution process.” The lack of a fixed time frame for identifying resolution professionals was, however, only one of the several factors behind the stretched bankruptcy resolution processes.
The IBBI Regulations 2018 also comes into play after the insolvency resolution process is not successful. Earlier, regulation 32 of the principal regulations provided four modes for liquidation of corporate debtor- sale on a standalone basis, slump sale, sell the assets in parcel, and sell the assets collectively. “A going concern indicates that the company has not completely dissolved yet, even though its valuation may be considered lower. This inclusion is in line with the spirit of the code. The objective of the code is to ensure continuity of the corporate debtor as a going concern to realise maximum value for creditors and ensure welfare of employees of the corporate debtor,” Panda said. Ravichandran added, “This amendment brings to the fore the need to preserve, if possible, the status of the undertaking as a going concern, which will bring more value rather than selling assets of a closed undertaking. This method of sale will protect contracts and arrangements that are under way and employees and stakeholders will benefit from the continued operations of the undertaking.”
