GS Paper - 3 (Economy)

In a move that will provide better market-linked solutions for stressed companies, watchdog IBBI has amended its regulations to allow sale of one or more assets of an entity undergoing insolvency resolution process, besides other changes. Also, the Committee of Creditors (CoC) can now examine whether a compromise or an arrangement can be explored for a corporate debtor during the liquidation period.

What

  1. The Insolvency and Bankruptcy Board of India (IBBI) has amended the regulations with the "objective to maximise value in resolution" and they came into effect from 16 September 2022.
  2. As many as 1,703 Corporate Insolvency Resolution Processes (CIRPs) ended up in liquidation till the end of June this year.
  3. The regulator has permitted a resolution professional and the CoC to look for sale of one or more assets of the corporate debtor concerned in cases where there are no resolution plans for the whole business.
  4. The Insolvency and Bankruptcy Code (IBC) provides for a market-linked and time-bound resolution of stressed assets.
  5. The amended regulations will also enable a "resolution plan to include sale of one or more assets of CD (Corporate Debtor) to one or more successful resolution applicants submitting resolution plans for such assets and providing for appropriate treatment of the remaining assets."
  6. With the amendments to IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, marketing of assets of a corporate debtor can be done that will help in wider dissemination of information to a wider and targeted audience of potential resolution applicants.