IBBI proposes tweaks in rules to reduce delays in corporate insolvency process
Insolvency and Bankruptcy Board of India (IBBI) issued a Consultation paper on issues related to reducing delays in the corporate insolvency resolution process. These issues are a) Substantiating default in admitting applications by operational creditors, b) Facilitating information availability for the preparation of information memorandum and preparation of avoidance applications, c) Dealing with avoidance applications after closure of a CIRP and d) Significant difference in valuations during a CIRP and appointment of a third valuer. IBBI has proposed to impose an obligation on the committee of creditors (COC) to share all the documents they possess on the company with the insolvency resolution professional (IRP). The documents proposed to be covered under this include details of valuation exercises, information on stock audits and relevant extracts from forensic audits. IBBI also proposed to make it mandatory to submit copies of GSTR-1 and GSTR-3B filed by operational creditors as additional documentary evidence in the resolution process. It also proposed that the CIRP regulations be amended to provide a threshold of 25% difference for appointing a third valuer. In other words, if the valuation report of first valuer and second valuer varies by 25%, a third valuer needs to be appointed. In the current rules, there are no specific thresholds and hence the 25% threshold will provide much more clarity to the Industry participants.
