The Insolvency and Bankruptcy Board of India (IBBI) introduced another set of amendments and amended the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016, by the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) (Fourth Amendment) Regulations (“Amendment”) which came into force w.e.f 5th October 2018.
The most important amendment which has been introduced by the above is amendment to Regulation 38 of IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016. Following are the changes as introduced under in Regulation 38:
- Priority in payment to Operational Creditors(OC) under resolution plan over Financial Creditors (FC).
- Removal of requirement of making payment to OCs within 30 days from the date of approval of resolution plan by Adjudicating Authority.
- Removal of the reference to dissenting financial creditors. Since the reference to Dissenting Financial Creditors has been removed from Regulation 38 as a consequence the definition of “Dissenting Financial Creditor” has been omitted.
The Regulations earlier provided payment of liquidation value to OCs and dissenting FCs in priority. The amendment has substituted the regulations to provide that the amount due to OCs under the resolution plan shall be paid in priority over FCs. Therefore, dissenting financial creditors have been deleted from the Regulations. The above amendment was brought in with an intent to streamline the Regulations with the provisions of the Code particularly Section 30 which provided that the minimum payable amount to OCs is the Liquidation value and the Board shall only specify the manner of payment. The earlier Regulation 38, wherein it was stated that “(b) liquidation value due to OCs” was read in a manner to imply that only liquidation value is payable to OC and by amending this provision the said ambiguity has been done away with.
Another aspect which was modified by the Amendment is the process regarding meeting of the Committee of Creditors and the voting by the Committee of Creditors. Regulation 21(3) has been amended. Earlier all the members of the Committee of Creditors were required to be present at the meeting of the Committee of Creditors during the time of voting. The Regulations earlier required the Resolution Professional to circulate the minutes of the meeting by electronic means to all members of the committee of creditors within forty-eight hours after the meetings conclusion to seek a vote of the members who did not vote at the meeting. Regulation 25 has been amended to require the Resolution Professional to circulate minutes of the meeting by the Committee of Creditors to the Authorised Representative of a class of creditors. Further, a new provision has been inserted requiring such Authorised Representative to circulate the minutes to the creditors within the class and provide a 12-hour voting window with notification of such window along with voting instructions at least 24 hours before the window opens. As a corollary to the changes in Regulation 25, Regulation 26 has been amended to require the Authorised Representative to vote as per the voting instructions received by him from the creditors in class.
These changes are procedural in nature and allow creditors in a class to vote through their Authorised Representative after a meeting of Committee of Creditors if they are unable to vote on any matter prior to such meeting.
Further, Regulation 39A has been introduced which mandates the Resolution Professional to preserve the physical and electronic copy of records relating to insolvency resolution process of the corporate debtor as per the record retention schedule.
All the above stated amendments have been manifested in with an intent of making the Code and its proceedings in line with the objective and purpose of the Code. These amendments have removed shortcomings and challenges which hinder smooth functioning of the process under the Code.