Amendments made in IBBI Regulations 2016 – IBBI (Insolvency Resolution Process for Corporate Persons)

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In today’s blogs we will be discussing the Amendments made in the IBBI Regulations 2016. We will explain in detail what this regulation is all about, important amendments made in it and other significant points related to it.

What is Insolvency and Bankruptcy Board of India (IBBI)

The Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) was established on 1st October 2016. It was formed under the Insolvency and Bankruptcy Code 2016. It aims to simplify the process of insolvency and bankruptcy proceedings. It covers Individuals, Companies, Limited Liability Partnerships and Partnership firms. The cases are handled using two tribunals NCLT (National Company Law Tribunal) and Debt recovery tribunal. Insolvency Professionals, Insolvency Professional Agencies, Insolvency Professional Entities, and Information Utilities are all regulated by it.

Objective behind Amendments made in IBBI Regulations 2016

The amendments aim at enhancing the discipline, transparency and accountability in corporate insolvency proceedings.

Amendments

1. Appointment of Professionals

• The IBBI allowed the Interim Resolution Professional (IRP) or Resolution Professional (RP) to appoint a professional to assist him in the discharge of his duties while conducting Corporate Insolvency Resolution Process (CIRP).
• Such appointments shall be made on arm’s length basis and follow a transparent process.

2. Disclosure of Former Name & Address

• Prior to the start of bankruptcy proceedings, a corporate debtor (CD) may have changed its name or registered office address. Stakeholders may find it difficult to relate to the new name or registered office address, and as a result, they may fail to participate in the CIRP.
• The insolvency professional conducting CIRP is to disclose all former names and registered office addresses so altered in the two years preceding the initiation of insolvency with the CD’s current name and registered office address.

3. Evasion of Transactions

• The resolution professionals are directed to inform the adjudicating authority if the CD is subjected to avoidance transactions.
• Avoidance transactions include undervaluation, preferential, extortionate and credit transactions, fraudulent trading and wrongful trading.

These amendment regulations are effective from 14 July, 2021.

Some Important terms

Insolvency – It is a state where individuals or companies are unable to pay the debts.

Bankruptcy – It is a legal declaration of a person or company being insolvent. A petition is filed in the court where all the outstanding debts of the company are measured and paid out from the company’s assets.

CIRP – The Corporate Insolvency Resolution Process (CIRP) is a creditor recovery process. A financial creditor, an operational creditor, or the company itself may commence CIRP if it becomes bankrupt.

With this we come to the end of this blog on IBBI regulations 2016. To summarize we talked about IBBI and covered all the amendments made in the regulations. 

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