Major IBC related regulatory changes in 2022

The year 2022 saw many important regulatory changes/amendments in the Insolvency and Bankruptcy Code in order to make it more effective. We enlist some of the changes here:

July 04, 2022: IBBI (Insolvency Professional Agencies) (Amendment) Regulations, 2022.

Purpose: To provide that disciplinary proceedings under the said regulations shall be conducted in accordance with the provisions of the IBBI (Inspection and Investigation) Regulations, 2017.

July 04, 2022: IBBI (Insolvency Professionals) (Amendment) Regulations, 2022:

The amendment regulations inter alia provide that:- (a) The disciplinary proceedings shall be conducted in accordance with the provisions of the IBBI (Inspection and Investigation) Regulations, 2017; (b) An Insolvency Professional (IP) shall file all relationship disclosures in a timely manner with the insolvency professional agency (IPA) he is enrolled with; (c) An insolvency professional (IP) or insolvency professional entity (IPE) shall raise invoices in their own name towards fees and such fees shall be paid through banking channel; and (d) An IP shall not include any amount incurred on account of non-compliance of any provision of the laws while conducting the various processes under the Code in the insolvency resolution process cost (IRPC) or liquidation cost

Purpose: To facilitate IP monitoring activities of the Board by improving information disclosure requirements and invoicing requirements of professional fee charged by IPs.

September 13, 2022: IBBI (Insolvency Resolution Process for Corporate Persons) (Third Amendment) Regulations, 2022

The amendment regulations inter alia provide for (a) a range or matrix of minimum fee payable to an IP dependent on quantum of claims admitted in a case; (b) payment of a fee higher than the minimum fee payable depending on certain features of the corporate debtor; (c) a performancelinked incentive fee structure payable to an IP not exceeding `5 crore; and (d) manner of providing for payment of such fee from funds of corporate debtor or interim finance or payment by the applicant or committee of creditors.

Purpose: To govern the fee charged by IPs for conduct of processes under the Code.

September 13, 2022: IBBI (Insolvency Professionals) (Second Amendment) Regulations, 2022

The amendment regulations prohibit an IP from accepting/ sharing any fees or charges from any professional and/ or support service provider who are appointed under the processes.

Purpose: To regulate the fee charged by IPs for conduct of processes under the Code and improve transparency in the same.

September 16, 2022: IBBI (Insolvency Resolution Process for Corporate Persons) (Fourth Amendment) Regulations, 2016

The amendment regulations inter alia provide for: (a) re-issue of request for resolution plan to sell one or more of assets of the corporate debtor in cases where no resolution plan has been received for the corporate debtor as a whole; (b) allow a resolution plan to include sale of one or more assets of corporate debtor to one or more successful resolution applicants submitting plans for such assets; (c) formulating a strategy for marketing of assets of corporate debtor; and (d) enable the CoC to explore option of compromise or arrangement and file such recommendation with AA while applying to AA for liquidation order

Purpose: To streamline the corporate insolvency resolution, reduce delays and maximize realisation for stakeholders.

September 16, 2022: IBBI (Liquidation Process) (Second Amendment) Regulations, 2022 and IBBI (Voluntary Liquidation Process) (Second Amendment) Regulations, 2022

The amendment regulations inter alia provide for the following: (a) The CoC constituted during CIRP shall function as stakeholders consultation committee (SCC) in the first 60 days. Post this period, the SCC shall be reconstituted based upon admitted claims; (b) SCC may propose replacement of liquidator to the AA and fix the fees of liquidator, if the CoC did not fix the same during CIRP; (c) If the CoC decides that the process of compromise or arrangement may be explored during liquidation process, the liquidator shall file application for the same before the AA within thirty days of the order of liquidation; and (e) SCC shall advice the liquidator, the manner in which proceedings in respect of avoidance transactions shall be pursued after closure of liquidation proceedings.

Purpose: To streamline the corporate and voluntary liquidation process to reduce delays and improve stakeholder participation.

September 20, 2022: IBBI (Insolvency Professionals) (Third Amendment) Regulations, 2022

The amendment regulations provide for the following :- (a) To raise the application fee for registration (one time) and annual fees (5 yearly) payable to the Board by IPs and insolvency professional entities (IPEs); (b) To raise the annual fee payable to the Board by an IP or IPE as a percentage of the professional fee earned for the services rendered as an IP/ IPE in the preceding financial year; and (c) To provide for regulatory fee payable to the Board by the IP, calculated at the rate of one per cent of IRPC, excluding the fee of IRP/ RP, and any costs incurred for running the business of the corporate debtor as a going concern.

Purpose: To raise various fees paid by IPs and IPEs to the Board and introduce a regulatory fee payable to the Board for conduct of CIRP, to raise the financial resources of the Board.

September 28, 2022: IBBI (Insolvency Professionals) (Fourth Amendment) Regulations, 2022

The salient features of the amendments are (a) an IPE, recognised by the Board, can seek registration as an IP with the Board; and (b) an IPE which is registered as an IP shall allow only its partner or director, as the case may be, who is an IP and holds a valid authorisation for assignment (AFA), to sign and act on behalf of it.

Purpose: To allow IPEs to function as IPs under the Code to institutionalize the profession of IP, establish a better governance framework, and address limitations posed by IP being an individual in dealing with large and complex processes that require concurrent efforts and actions.

October 03, 2022: IBBI (Model Bye-Laws and Governing Board of Insolvency Professional Agencies) (Amendment) Regulations, 2022

The amendment regulations provided for consequential changes in the Model Bye Laws of IPAs, as provided in the Schedule of IBBI (Model Bye-Laws and Governing Board of Insolvency Professional Agencies) Regulations, 2016, in view of allowing IPEs to register as IPs with the Board and perform the functions of IP under the Code and regulations made thereunder

Purpose: To provide for consequential changes in the Model Bye-Laws regulations in view of allowing IPEs to register as IPs with the Board.

Also see: GST dept paves way for reduced tax demand on companies undergoing insolvency process