Insolvency regulator proposes part resolution of corporate debtor’s assets, business
The insolvency regulator and the government, in order to make resolution under the Corporate Insolvency Resolution Process (CIRP) more viable, are now contemplating to allow resolutions of part assets/ businesses.
In a discussion paper floated by the Insolvency and Bankruptcy Board of India (IBBI), it has been proposed that the insolvency professional and CoC would be enabled to explore resolutions of part assets/businesses by allowing submission of different resolution plans for these part assets/businesses, while a revised request for resolution plan (RFRP) is issued.
“The evaluation matrix can be amended accordingly. Such determination can be made when there was interest expressed by prospective bidders at the EoI stage but there have been no resolution plans received after the time for submission of plans has lapsed,” says the discussion paper.
The paper thus suggests amendment in Regulation 37A of the Insolvency and Bankruptcy Code (IBC) so as to enable the RP and the creditor may in cases where there were prospective bidders expressing interest in the corporate debtor but no resolution plan was received after the time for submission of the plan has lapsed explore to resolve part of the assets of the corporate debtor.
A resolution under this regulation shall be enabled by modification of the request for resolution plan issued as provided in regulation 36B.
Regulation 37 of CIRP allows transfer of all or part of the assets of the CD to one or more persons. It also allows sale of all or part of assets whether subject to any security interests or not. Regulation 37 of CIRP Regulation also allows restructuring of the corporate debtor, by way of merger, amalgamation and demerger.
During liquidation, assets are being sold in various parts but not in CIRP stage. However, in sale during the liquidation stage, there is substantial loss in value.
The consultation paper also discusses the concern that the liabilities of the CD may all be transferred to certain assets/units while certain assets are kept unencumbered by design and are taken over by a targeted resolution plan.
It says this issue needs to be addressed for its proposal to allow part resolution to be successful.
Also see: Regulator planning new insolvency framework for homebuyers
