Do not entertain unsolicited revision in resolution plans, suggests insolvency regulator
Taking note of the fact that request for revision of resolution plans multiple times, and submission of unsolicited plans cause delay and uncertainty in the CIRP process, the Insolvency and Bankruptcy Board of India (IBBI) has proposed an amendment in the insolvency law limiting the number of revisions in a resolution plan to two.
In a consultation paper, the insolvency regulator has suggested that the resolution professional and the Committee of Creditors (CoC) should place the request for resolution plans with due consideration of the market conditions.
The CoC should decide on allowing for revision of the resolution plans, number of such revisions and timelines for the same on ex-ante basis. “The number of revisions shall not exceed two,” says the consultation paper.
It also asks the CoC to decide the timelines within which it will allow for negotiation and changes to the submitted resolution plans. CoC and resolution professional should not entertain unsolicited revision to resolution plans,” says the consultation paper.
The regulator wants the CoC to decide whether it considers appropriate to opt for a Swiss challenge method and if the same is decided by the CoC, then it should be provided in Request for Resolution Plans.
The CoC has also been asked to decide basis for evaluation, time limit within which the Swiss challenge process should be concluded and the minimum threshold for improvement over the resolution plan on ex-ante basis.
According to the consultation paper, the proposed amendment would help by allowing additional options to the CoC for resolution of a firm while under CIRP.
The cap on number of revisions in resolution plan would ensure that the sacrosanct timelines envisaged under the Code is practicable.
Further, such an amendment would help instilling faith amongst stakeholders in the corporate insolvency resolution process and prevent potential misuse in absence of any specifications.
This would also ensure that the CIRP remains timebound and value obtained is a competitive one and the maximum achievable given the market condition.
What is Swiss Challenge?
Swiss Challenge is a bidding process, wherein a bidder (original bidder) makes an unsolicited bid to the auctioneer. Once approved, the auctioneer then seeks counter proposals against the original bidder’s proposal and chooses the best amongst all options (including the original bid). The original bidder in most cases is granted the “right to first refusal”. If the original bidder agrees to match its offer to the challenging proposal, the bid is awarded to him, else it is awarded to the challenging bidder.
Also See: A code of conduct for CoC, finally!
