Tag: bankruptcy board of india

NSE, Insolvency and Bankruptcy Board of India ink pact for research collaboration, BFSI News, ET BFSI

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Leading stock exchange NSE on Friday said it has joined hands with the Insolvency and Bankruptcy Board of India (IBBI) for research collaboration. The objective of the collaboration is to create a research ecosystem in the area of insolvency and bankruptcy in the country, the exchange said in a statement.

It further said that an efficient insolvency and bankruptcy resolution system enables timely resolution of financial stress, balances interests of all stakeholders, promotes entrepreneurship and increases availability of credit at optimal costs. This, in turn, improves growth prospects and builds institutional strength in an economy.

IBBI is a unique regulator, which regulates insolvency professionals as well as insolvency processes.

Under this collaboration, NSE and IBBI will focus on enhancing the existing research efforts in the areas related to insolvency and bankruptcy in India, promoting studies that explore interlinkages between the development of the insolvency process, financial markets and economy, the statement noted.

Also, they will analyse the effectiveness of insolvency laws and practices across the world and fostering evidence-based policy recommendations to strengthen the insolvency framework in India.

IBBI Whole-time Member Sudhaker Shukla said that in an evolving area such as insolvency and bankruptcy, there is a dire need to promote credible research on the best practices and outcomes.

To this effect, IBBI has collated a dynamic data set relating to processes and outcomes under the IBC and encouraged evidence-based research in the insolvency space, he said.

“To further this research, our endeavour is to explore new avenues and possibilities in the sphere of research collaboration. In this context, the partnership between IBBI and NSE will go a long way in plugging the research void in such an important area of distressed assets and its resolution,” he added.

Vikram Limaye, MD and CEO, NSE, said the exchange has always been at the forefront in encouraging research in relevant and emerging issues that are important for effective policy making and promote development of markets.



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IBBI puts more onus on RP, says dutybound to find frauds, BFSI News, ET BFSI

Banking & Finance

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Seeking to enhance transparency in the insolvency process, IBBI has amended regulations for corporate insolvency proceedings wherein a resolution professional will be required to provide details about his or her opinion about avoidance transactions pertaining to a corporate debtor.

The Insolvency and Bankruptcy Board of India (IBBI) has amended the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations.

The amendments to the regulations are aimed at enhancing “the discipline, transparency, and accountability in corporate insolvency proceedings”.

A resolution professional is duty-bound to find out if a Corporate Debtor (CD) has been subject to avoidance transactions, namely, preferential transactions, undervalued transactions, extortionate credit transactions, fraudulent trading and wrongful trading, and file applications with the adjudicating authority seeking appropriate relief.

This not only claws back the value lost in such transactions increasing the possibility of reorganisation of the CD through a resolution plan, but also disincentivises such transactions preventing stress to the CD.

“For effective monitoring, the amendment requires the RP to file Form CIRP 8 on the electronic platform of the Board, intimating details of his opinion and determination in respect of avoidance transactions,” the release said.

The IBBI has put out the format of form CIRP 8 and it needs to be filed in respect of every CIRP ongoing or commencing on or after July 14.

Intimation of changes

With the amended regulations, an insolvency professional conducting CIRP will also have to disclose all former names and registered office address(es) so changed in the two years preceding the commencement of insolvency along with the current name and registered office address of the CD, in all its communications and records.

CIRP refers to the Corporate Insolvency Resolution Process.

The amendment takes into account the possibility where a CD may have changed its name or registered office address prior to commencement of the insolvency process. In such cases, the stakeholders may find it difficult to relate to the new name or registered office address and consequently fail to participate in the CIRP.

Roping in professionals

Under the insolvency regulations, an interim resolution professional or a resolution professional may appoint any professional, including registered valuers, to assist him in the discharge of his duties in the conduct of the CIRP.

“The amendment provides that the IRP/RP may appoint a professional, other than registered valuers if he is of the opinion that the services of such professional are required and such services are not available with the CD.

“Such appointments shall be made on an arm’s length basis following an objective and transparent process. The invoice for a fee shall be raised in the name of the professional and be paid into his bank account,” the release said. The amendments have come into effect from July 14.



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Haircut under IBC rises to 60% in fiscal 2021, half the closes cases liquidated, BFSI News, ET BFSI

Banking & Finance

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More than half of the total 4,376 cases under the Insolvency and Bankruptcy Code have been closed with the rest undergoing resolution.

Almost half of the 2,653 cases closed by lenders under IBC in fiscal 2021 have ended in liquidation while only 13 per cent were resolved, according to the quarterly bulletin of the Insolvency and Bankruptcy Board of India.

About 23 per cent of the closed cases are either under review or under appeal.

In 16 per cent of cases, the companies were handed back to the promoters after they cleared part of their dues under Section 12A of the insolvency act.

About 43 per cent of cases admitted so far are filed by the financial creditors while the rest 51 per cent of the admitted cases were initiated by operational creditors.

Haircut rises

In the resolved cases, the haircut, or the loss to banks on their claims, rose to 60 per cent in fiscal 2021, from 55 per cent average in the previous years.

In the March 2021 quarter alone, haircut rose to a whopping 74 per cent of the claims made by the lenders against the defaulters.

About 79 per cent of the ongoing cases till March this year have already passed 270 days since admission. Experts say delay causes erosion in the value of assets and increases chances for liquidation.

The IBC saw an addition of 499 new cases in the last financial year, where the process was suspended due to the Covid pandemic.

Liquidation

About 80% of bankruptcy proceedings involving a default of less than Rs 1 crore were initiated by operational creditors, while 80% of the cases with defaults of over Rs 10 crore were initiated on applications by financial creditors.

Around three-fourths of all bankruptcy proceedings started by operational creditors resulted in the liquidation of the corporate debtor while in case of proceedings initiated by financial creditors that have been concluded, nearly half of the businesses have faced liquidation.

About 74.37% of the corporate insolvency resolution process ending in liquidation (946 out of 1272 for which data are available) were earlier with BIFR and / or defunct.

During the quarter January-March 2021, 149 corporate insolvency resolution process (CIRPs) ended in orders for liquidation, taking the total CIRPs ending in liquidation to 1277, excluding 10 cases where liquidation orders have been set aside by NCLT, NCLAT or courts.

Of these, a final report has been submitted in 240 cases. There are 1,037 ongoing liquidation processes.

During January-March, 2021, 34 more liquidation processes were closed, taking the total number of closures by dissolution, sold as a going concern or compromise or arrangement to 138.

Growing stress

The corporate sector has pitched for a fresh suspension, arguing that there will be additional stress in the wake of the lockdown announced across most states to check the surge in cases, which are still rising by over three lakhs daily.

Industry body Assocham has urged the government to reimpose a moratorium on taking debt-ridden firms to the NCLT under the IBC till December this year following the severe second wave of coronavirus. In a representation to the Finance Ministry, the chamber said that given the increasing pressure on businesses, it would be imperative to extend the NCLT (National Company Law Tribunal) moratorium to ensure that the pandemic “does not wreak havoc” on the economy.



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