'Wilful defaulters' barred from taking back insolvent companies

The Insolvency and Bankruptcy Board of India made norms strict for others bidding for insolvent companies

The insolvency regulator has tightened conditions on promoters trying to take back the insolvent companies, allaying fears of lenders that such firms might go back to the very people who were responsible for the current mess, at lower prices. As such, no wilful defaulter can take back the company now as they would be screened by the committee of creditors.

The Insolvency and Bankruptcy Board of India (IBBI) also made norms strict for others bidding for insolvent companies. As insolvency cases keep mounting in the National Company Law Tribunal (NCLT), the IBBI is keen to ensure that resolution professionals facilitate a proper shift in ownership in the case of acquisition of an insolvent company by another entity. The regulator amended norms for Insolvency Resolution Process for Corporate Persons Resolution Process in this regard.

“Now, prior to the approval of a resolution plan, the resolution applicants, including promoters, will be put to a stringent test with respect to their credit worthiness and credibility,” an official statement said. 

The revised regulations make it incumbent upon the resolution professional to ensure that the plan presented contains relevant details to assess credibility of the resolution applicants, the statement said.

The resolution applicants’ details in terms of “convictions, disqualifications, criminal proceedings, categorisation as wilful defaulter as per RBI guidelines, debarment imposed by Sebi, if any”, would have to be disclosed, say the amendments.