IBBI amends norms to increase transparency in insolvency resolution process

Regulator IBBI has amended corporate insolvency resolution process norms, including making it compulsory to have separate accounts for each real estate project undergoing resolution and enabling the creditors' committee to constitute a monitoring panel to oversee implementation of the resolution plan.

"With an aim to increase transparency and reduce disputes over valuation-related issues, the amendment provide for explaining the valuation methodology to the members of the CoC (Committee of Creditors) before the computation of estimates," as per the revised norms.

The Insolvency and Bankruptcy Board of India (IBBI) also said that fair value may be made part of the information memorandum to foster informed participation in the process. The CoC will also have the freedom to decide not to share such information where such disclosure is not beneficial for the resolution.

With respect to real estate projects, the regulator said the CoC can ask for separate resolution plans for each project.

Each project in a real estate case may need different treatment in terms of resolution and therefore may need different treatment in terms of resolution. After due examination, the CoC may direct the resolution professional to invite a separate plan for each project, as per the regulations.

"To ensure financial transparency and accountability, the amendment makes it mandatory to have a separate bank account for each real estate project under a corporate debtor," IBBI said in a release on Friday.

As per the amended IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, the resolution professional should convene a meeting of the CoC at least once every 30 days. In case the CoC approves, such meetings can be held at least once in a quarter.

The CoC can also decide the period of opening of the electronic voting window, with a minimum of 24 hours and a maximum of 7 days. There can be increments of 24 hours each.

Additionally, the amended norms enable the CoC to decide on the constitution of a monitoring committee to oversee the implementation of the resolution plan.

According to the release, the resolution professional can continue to discharge his or her responsibilities under the resolution process till the adjudicating authority decides an application for an extension.

Regarding the insolvency resolution process cost, IBBI said the resolution professional can seek approval from the CoC for all costs, including going concern expenses.

IBBI is a key institution in implementing the Insolvency and Bankruptcy Code (IBC), which provides for a time-bound and market-linked resolution of stressed assets.