Recent Amendments To CIRP Regulations
On February 15, 2024, the Insolvency and Bankruptcy Board of India (IBBI) introduced a series of amendments to the Insolvency Resolution Process for Corporate Person Regulations 2016 through which it brought significant changes aiming to streamline procedures, enhance transparency, and bolster the efficacy of the resolution process. This Article focuses on the particulars of changes and its impact on the creditors, resolution professionals, real estate projects. It helps to understand the altered regulatory environment and its potential impact on the future of corporate insolvency resolutions.

Amendments regarding the Committee of Creditors:

1. Maximum limit on the voting window for CoC
   The CoC is empowered to determine the duration of the electronic voting window, with a specified period of a minimum of twenty-four hours and a maximum of seven days. Earlier there was no maximum limit prescribed in the regulations, but now a maximum limit of seven days is prescribed under regulation 25(5)(b) of IBBI (IRP for corporate persons) Regulations,2016. The CoC also has an additional option of twenty-four hour extension. In case the matters on the voting list have already acquired the necessary majority vote, the Resolution Professional has the authority to give one final chance to vote by extending the voting window by a maximum of twenty-four hours.[i]
   
   This amendment attempts to provide efficient and effective solutions by streamlining the decision making and saving time for the completion of the overall insolvency process.
    
2. Monthly meeting of CoC:
   To guarantee consistent participation and supervision of the CoC in the proceedings, the Resolution Professional is required to call a CoC meeting at least once in thirty days. In regulation 18(1), the CoC is given additional power to increase the duration between meetings to a maximum of one meeting every quarter.[ii] It ensures that the CoC has enough freedom to modify the repetition and control the conduction of meetings in accordance to the development and progress made in the CIRP.
    
3. Fair value in Information Memorandum:
   Prior to the amendment, there was no explicit mention of fair value of the corporate debtor in the information memorandum, regardless of whether the information memorandum included full information of the assets, liabilities, financial records, and other pertinent data. The amendment in regulation 36 (2) (ka) mandates the disclosure of the fair value of assets in the information memorandum.[iii] This makes it easier for the resolution professional to formulate competing bids and understand the corporate debtor's worth. Although the CoC has the right to choose not to disclose the information if, it has reasons to believe that such disclosure would hinder the settlement process.
    
4. Valuation methodology:
   The Resolution professionals are obligated to furnish the members with an explanation of the valuation methodology prior to the computation of estimates as per regulation 35(1)(a). Previously, Resolution Professionals were not required to explicitly explain the valuation details and techniques to the CoC apart from the valuation reports.[iv] Since valuation is an important part of CIRP, this amendment reduces disagreements, increase transparency and enhance the understanding and participation of the members of CoC during the CIRP.
    
5. Constituting monitoring committee:
   This amendment authorizes the CoC to establish a Monitoring Committee under regulation 38(4) to supervise the execution of the resolution plan if it deems it necessary.[v] According to regulation 38(5), the committee may comprise of Resolution Professional, another insolvency professional or any other person as a member.[vi] This will ensure proper functioning of resolution professional and other professionals during CIRP. It will also ensure that the terms of the plan are adhered to and to hold parties accountable to fulfill their obligations which will lead to higher success rates in the resolution process.

Amendments Regarding Real Estate:

1. Separate bank account for each real estate project of the corporate debtor:
   In order to protect the interests of stakeholders, financial transparency, and increased accountability, the amendment in regulation 4D states that the resolution professional is required to manage a separate bank account for each real estate project in which the corporate debtor is involved.[vii] Prior to this amendment, the financial transactions of various projects were amalgamated, so it was difficult to track the financial flows and obligations connected to specific projects. It is one of the significant changes as it improves financial responsibility and ensures more transparency, particularly in the complex sector of real estate.
    
2. Separate plan for each real estate project:
   Another amendment brought about through regulation 36A (1) grants the CoC the power to direct the resolution professional to invite individual resolution proposals for each real estate project after a thorough examination.[viii] Earlier, a single and consolidated resolution plan was submitted by the corporate debtor which did not account for the distinct nature and financial health of each project. The CoC can evaluate and decide if a separate resolution plan is required for a particular project for the benefit of the stakeholders involved.

Amendments Regarding Resolution Professional:

1. Approval for IRP cost:
   The Resolution Professional is bound to seek approval of the CoC for the expenditure and cost incurred throughout the resolution process as well as include the operating status of corporate debtor in every meeting as mentioned in regulation 31B. It includes all the going concern costs critical to safeguard the value of corporate debtor.[ix] This change ensures the direct role of CoC in active monitoring and involvement in expenditure incurred by the Resolution Profession during the process.
    
2. Resolution Professional to continue to discharge his responsibilities pending extension application:
   For the removal of ambiguity with respect to the roles and duties of Resolution Professional during the interim period when an application for extension is filed but not yet ruled upon, the amendment under regulation 40(2) clarifies that in order to ensure that the resolution process proceeds without interruption or delay, the Resolution Professional is specifically required to continue managing the affairs of the corporate debtor and make sure that the resolution process doesn't stall while it awaits the decision of extension application.[x]

Conclusion:
The amended regulations signal a new era in insolvency proceedings, emphasizing efficiency, accountability and fairness. As stakeholders adapt to these changes, the insolvency ecosystem is poised for positive transformation. However, the challenges remain. The IIBI's commitment to periodic reviews and refinements will be crucial in addressing emerging issues and fine tuning the regulations.

The success of these reforms will be determined by vigilance, collaboration, and adherence to the spirit of law. Stakeholders across the corporate landscape must embrace these changes and work collectively toward a stronger insolvency regime.

End-Notes:

1. Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016, Reg. 25(5)(b), available at: https://ibbi.gov.in//uploads/legalframwork/17079b9123b1e517e074bef04e7c3400.pdf
2. Regulation 18 (1)
3. Regulation 36 (2) (ka)
4. Regulation 35 (1) (a)
5. Regulation 38 (4)
6. Regulation 38 (5)
7. Regulation 4D
8. Regulation 36A (1)
9. Regulation 31B
10. Regulation 40 (2)

Written By: Srishti Patwal & Vishal Doot