Govt unveils pre-pack regulations
The Insolvency and Bankruptcy Board of India (IBBI) releases the pre-pack regulations to be called the Insolvency and Bankruptcy Board of India (Prepackaged Insolvency Resolution Process) Regulations, 2021. These regulations comes into force on the date of their publication in the Official Gazette.
The regulations are divided into 10 chapters with separate chapters dedicated to resolution professionals, initiation process, public announcements and claims, committee of creditors, meeting of CoC, etc.
The initiation process
The pre-pack regulations lay down the process of initiation of the process. The applicant should convene meetings of the financial creditors, who are not related parties of the corporate debtor. The notice of the meeting should be served to the financial creditors, who are not related parties of the corporate debtor, at least five days before the date of the
meeting, unless a shorter time is agreed to by all of them. The notice of the meeting should indicate the date, time and venue of the meeting, and enclose a list of creditors along with the amount due to them in Form P2.
The financial creditors who are not related parties of the corporate debtor and have not less than 10% of the value of the total financial debt of such creditors may propose names of insolvency professionals. The terms of appointment of the resolution professional under this regulation should include a) fee payable to him for performing duties b) fee payable to him and expenses to be incurred by him for conducting the process; and c) fee payable to him and expenses to be incurred by him in case management of the corporate debtor is vested with him under section 54J.
Where the corporate debtor has no financial debt or where all financial creditors are related parties, the applicant should convene a meeting of operational creditors, who are not related parties of the corporate debtor.
On examination of Form P2, the resolution professional should ascertain class(es) of creditors, if any. The resolution professional should for representation of creditors in a class ascertained in the committee, identify three insolvency professionals who are a) not relatives or related parties of the applicant or the resolution professional; b) having their addresses, as registered with the Board, in the State or Union territory, as the case may be, which has the highest number of creditors in the class as per their addresses in the records of the corporate debtor. If a state or Union territory does not have adequate number of insolvency professionals, the insolvency professionals having addresses in a nearby State or Union territory, as the case may be, can be considered.
The resolution professional must obtain the consent of the insolvency professionals identified to act as the authorised representative of creditors in the class in Form P5; seek choice of the creditors in the class for an insolvency professional, who has consented, select the insolvency professional, who is the choice of the highest number of creditors in the class to act as the authorised representative of the creditors of the respective class, and inform the name of the insolvency professional selected along with his consent in Form P5, to the applicant.
The applicant should furnish audited financial statements of the corporate debtor for the last two financial years, provisional financial statements for the current financial year made up to the date and Form P5 submitted by the authorised representatives selected.
To know more finer details of pre-pack regulations, clicking the below link and download the copy of the regulations.
