CIRP (Second Amendment Regulations), 2023 – A snapshot
– Team Resolution | resolution@vinodkothari.com
The Insolvency and Bankruptcy Board of India (IBBI), has, vide notification dated 18th September, 2023 introduced the IBBI (Insolvency Resolution Process for Corporate Persons) (Second Amendment) Regulations, 2023 (‘CIRP Amendment Regulations’/ ‘Amendment Regulations’) effective from 18th September, 2023, so as to further streamline the insolvency resolution process.
The amendments (discussed below) provide some relaxation to the stakeholders thereby extending the timeline for submitting claims. Further, an attempt has also been made to provide assistance to NCLT Benches for dealing with applications u/s 7 or 9 for admission/rejection of claim. However, the obligation of the Resolution professionals (RPs) have also been increased as the amendment now requires the RPs to not just take handover of the assets of the Corporate Debtor (CD) but also verify asset by asset list of the CD, tally the same with the financials of the CD, and to report the same while making application u/s 19(2), if not found in conformity with the assets shown in the financials of the CD. Also, for condonation of delay of claims filed by the stakeholders, the amendment now requires the RP to file application before AA.
Below we provide a brief snapshot of the amendments introduced vide the CIRP Amendment Regulations –
| Regulation | Subject | Pre-Amendment | Amendment | Remarks |
| 2D | Details of debt, default and limitation in respect of applications under section 7 or section 9 | New insertion | The financial creditor or the operational creditor, as the case may be, shall also submit u/s 7 or u/s 9 along with evidence, chronology of the debt and default including the date when the debt became due, date of default, dates of part payments, if any, date of last acknowledgment of debt and the limitation applicable. | The insertion is to assist the NCLT benches to admit/reject the applications filed u/s 7 or 9, as the case may be, in a time bound manner as the basic information required to admit such applications will now be chronologically mentioned at one place for easy reference of the Benches. |
| 3A | Assistance and cooperation by the personnel of the corporate debtor. | New insertion | Assistance and cooperation by the personnel of the corporate debtor- 1. The interim resolution professional (“IRP”) or resolution professional (“RP”), as the case may be, shall take custody and control as specified under this regulation from the personnel of the corporate debtor (“CD”), its promoters or any other person associated with the management of the corporate debtor as the case may be, of the following:- (a) the records of information relating to the assets, finances and operations of the corporate debtor referred in clause (a) of section 18 and such other information required under regulation 36; (b) the assets recorded in the balance sheet of the corporate debtor or in any other records referred in clause (f) of section 18. | The amendment focuses regarding the assistance and cooperation expected from the personnel of the CD by providing a list of assets, finances and operations of the corporate debtor to the IRP/ RP The amendment will cast more obligation over RP to not just take handover of the assets of the CD but also verify asset list of the CD and tally the same with the financials of the CD, and to report the same while making application u/s 19(2), if not found in conformity with the assets shown in the financials of the CD. This should not be treated as absolving the promoters from their liabilities to cooperate with the RP |
| 12(1) | Submission of proof of claim | A creditor shall submit a claim with proof on or before the last date mentioned in the public announcement. | A creditor shall submit a claim with proof on or before the last date mentioned in the public announcement. Provided that a creditor, who fails to submit claim with proof within the time stipulated in the public announcement, may submit his claim with proof to the interim resolution professional or the resolution professional, as the case may be, up to the date of issue of request for resolution plans (“RFRP”) under regulation 36B or ninety days from the insolvency commencement date (“ICD”), whichever is later: Provided further that the creditor shall provide reasons for delay in submitting the claim beyond the period of ninety days from the insolvency commencement date | This would give the creditors some flexibility and relief to submit claims even after 90 days from the ICD till the date of issue of RFRP (T+105 days) by providing reasons for delay, that is to say, an additional 15 days timeline provided to the creditors to submit their claim if they failed to submit their claim within the timeline mentioned in the public announcement. |
| 12(2) | Time-limit for completion of insolvency resolution process. | Provided that a creditor, who fails to submit claim with proof within the time stipulated in the public announcement, may submit his claim with proof to the interim resolution professional or the resolution professional, as the case may be, on or before the nineteenth day of the insolvency commencement date | Omitted | Reg. 12(1) and Reg. 12(2) has been consolidated |
| Reg. 13(1A), 13(1B), 13(1C) | Verification of claims | New insertion | (1A) Where the interim resolution professional or the resolution professional, as the case may be, does not collate the claim after verification, he shall provide reasons for the same. (1B) In the event that claims are received after the period specified under sub-regulation (1) of regulation 12 and up to seven days before the date of meeting of creditors for voting on the resolution plan or the initiation of liquidation, as the case may be, the interim resolution professional or resolution professional, as the case may be, shall verify all such claims and categorise them as acceptable or non-acceptable for collation. (1C) The interim resolution professional or resolution professional, as the case may be, shall:- (a) intimate the creditor within seven days of categorisation thereof under sub-regulation (1B) and provide reasons where such claim has been categorised as non-acceptable for collation; and (b) put up the claims categorised as acceptable under sub-regulation (1B) and collated by him to:- (i) the committee in its next meeting for its recommendation for inclusion in the list of creditors and its treatment in the resolution plan, if any; and (ii) submit such claims before the Adjudicating Authority for condonation of delay and adjudication wherever applicable.” | This is with respect to delayed claim submitted by creditors. Now, in case of CIRP as well, the RP will require to collate such claims, categorise them as acceptable or non-acceptable and put the same before – CoC in the next meeting for recommendation and inclusion in list of creditors; andAA for condonation of delay. The condonation of delay through AA is a new addition under the CIRP Regulations. This amendment has not only increased the burden on RP to file applications on behalf of creditors who intend to submit their claim as on the date of consideration of plan, but also allows scope for further litigation. As the NCLTs are already clogged there will be additional application for condonation of delay in filing claims as well and the entire process of finalising resolution plan may therefore get delayed. |
| Reg. 16A(3A), 16(3B), 16(3C) | Authorised Representative | New Insertion | (3A) The financial creditors in the class, representing not less than ten per cent. voting share may seek replacement of the authorised representative with an insolvency professional of their choice by making a request to the interim resolution professional or resolution professional who shall circulate such request to the creditors in that class and announce a voting window open for at least twenty-four hours. (3B) Subject to clauses (a) and (b) of sub-regulation (2) of regulation 4A, the interim resolution professional or resolution professional, as the case may be, shall offer choice of at least three insolvency professionals to the financial creditors in the class including such insolvency professional(s) proposed under sub-regulation (3A) along with the existing authorised representative. (3C) The resolution professional shall apply to the Adjudicating Authority for appointment of the authorised representative who receives the highest percentage of voting share of financial creditors in that class. | Presently, there is no express provision for replacement of an AR after his appointment by the AA. The insertion will allow the creditors to seek for an alternate AR to represent them and to deal with their issues and grievances. |
| Reg. 16A(8) | Authorised Representative | The authorised representative of creditors in a class shall be entitled to receive fee for every meeting of the committee attended by him in the following manner, namely: Number of creditors in the class Fee per meeting of the committee (Rs.) 10-100 15,000 101-1000 20,000 More than 1000 25,000 | The authorised representative of creditors in a class shall be entitled to receive fee for every meeting of the committee attended by him in the following manner, namely: Number of creditors in the class Fee per meeting of the committee (Rs.) 10-100 30,000 101-1000 40,000 More than 1000 50,000 b. The authorised representative shall be entitled to receive fee for every meeting of the class of creditors convened by him in the following manner, namely: – Number of creditors in the class Fee per meeting of creditors in class with AR(Rs.) 10-100 10,000 101-1000 12,000 More than 1000 15,000 (c) The payment of fee to authorised representative shall be part of insolvency resolution process cost in respect of two meetings with the creditors he represents corresponding to a meeting of the committee of creditors. (d) The fee for any additional meeting beyond two meetings corresponding to a meeting of the committee of creditors shall be part of the insolvency resolution process subject to approval of the committee of creditors. | The amendment provides for revision in the compensation to the ARs and that fees of ARs upto 2 meetings of CoC shall form part of IRPCP Cost and for additional meetings, the same shall be subject to decision of CoC. |
| Reg. 10 | Authorised Representative | New insertion | The authorised representative shall: – (a) assist the creditors in a class he represents in understanding the discussions and considerations of the committee meetings and facilitate informed decision-making; (b) review the contents of minutes prepared by the resolution professional and provide his comments to the resolution professional, if any; (c) help the creditors in a class he represents during the consultations made by the resolution professional to prepare a strategy for marketing of the assets of the corporate debtor in terms of sub-regulation (1) of regulation 36C; (d) work in collaboration with the creditors in a class he represents to enhance the marketability of the assets of the corporate debtor in terms of sub-regulation (3) of regulation 36C; (e) assist the creditors in a class he represents in evaluating the resolution plans submitted by resolution applicants; (f) ensure that the creditors in a class he represents have access to any information or documents required to form an opinion on issues discussed in the committee meetings; (g) update regularly the creditors in a class he represents on the progress of the corporate insolvency resolution process; (h) make suggestions for modifications of the resolution plan as may be required by the creditors in class he represents; (i) record proceedings and prepare the minutes of the meeting with the creditors in a class he represents; and (j) act as a representative for the creditors in a class he represents in representations before the Adjudicating Authority, National Company Law Appellate Tribunal, and other regulatory authorities. | The amendment contains enhanced roles and responsibilities of the AR. |
| Reg. 28(1) | Transfer of debt due to creditors. | In the event a creditor assigns or transfers the debt due to such creditor to any other person during the insolvency resolution process period, both parties shall provide the interim resolution professional or the resolution professional, as the case may be, the terms of such assignment or transfer and the identity of the assignee or transferee. | In the event a creditor assigns or transfers the debt due to such creditor to any other person during the insolvency resolution process period, both parties shall, within seven days of such assignment or transfer, provide the interim resolution professional or the resolution professional, as the case may be, the terms of such assignment or transfer and the identity of the assignee or transferee. | Under this amendment, a timeline of 7 days has been provided to inform details in case of assignment or transfer of debts by the transferor and transferee. |
| Reg. 30B | Audit of Corporate Debtor | New Insertion | (1) Any member(s) of the committee may propose an audit of the corporate debtor along with the objectives, scope, estimate of the costs, timeframe and name(s) of the proposed auditor(s). (2) A proposal made under sub-regulation (1) shall be considered as per sub-regulation (3) of regulation 18 and an audit shall be conducted if such proposal is approved by the committee. (3) The audit shall be conducted by an insolvency professional having qualifications required for such audit. (4) The auditor shall prepare a report detailing his findings and the same shall be presented before the committee along with the comments of the interim resolution professional or the resolution professional, as the case may be. (5) The expenses of such audit shall be treated as insolvency resolution process costs. | A new requirement relating to the audit of the CD has been inserted with an intention to make the CIRP more efficient and transparent. It is mostly in the nature of forensic audit, wherein the audit shall be conducted by an Insolvency Professional having qualification to conduct such audits. |
| Reg. 36B (1) | Request for resolution plans | The resolution professional shall issue the information memorandum, evaluation matrix and a request for resolution plans, within five days of the date of issue of the provisional list under sub-regulation (10) of regulation 36A to – (a) every prospective resolution applicant in the provisional list; and (b) every prospective resolution applicant who has contested the decision of the resolution professional against its non-inclusion in the provisional list. | The resolution professional shall, within five days of the date of issue of the final list under sub-regulation (12) of regulation 36A, issue the information memorandum, evaluation matrix and a request for resolution plans to every resolution applicant in the final list: Provided that where such documents are available, the same may also be provided to every prospective resolution applicant in the provisional list. | Pursuant to this amendment, now RP is required to issue information memorandum, evaluation matrix and a request for resolution plans to every resolution applicant within 5 days of preparation of Final list of prospective resolution applicants. |
| Reg. 40A- row relating to Reg. 36B | Model time-line for corporate insolvency resolution process | Issue of RFRP, including Evaluation Matrix and IM Within 5 days of the issue of the provisional list T+105 Receipt of Resolution Plans At least 30 days from issue of RFRP (Assume 30 days) T+135 | Issue of RFRP, including Evaluation Matrix and IM Within 5 days of the issue of the final list T+105 Receipt of Resolution Plans At least 30 days from issue of RFRP (Assume 30 days) T+135 | Model timeline has been updated in terms of the amendments above. |
| Reg. 40B (1A) | Filing of forms | Information memorandum is not issued within 92 days from the date of public announcement Date specified in column (2) + 3 days X+30th day, X+60th day, X+90th day and so on, till the activity is completed. RFRP is not issued within 10 days from the date of issue of information memorandum to the committee |
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