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Bankruptcy Board notifies amendments to the Insolvency and Bankruptcy Board of India Act, 2016

The Insolvency and Bankruptcy Board of India (IBBI) notified the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Individuals) (Second Amendment) Act, 2016 on July 14, 2021.

The amended Act will increase discipline, transparency and accountability in insolvency proceedings,
▪️Corporate Debtor (CD) can change his name or registered office address before the commencement of the insolvency process. In such cases, stakeholders may find it difficult to reconcile with the new name or registered office address. As a result they may fail to participate in CIRP. Under this amendment, it will be necessary for the insolvency professional (IP) operating the CIRP to submit the current name and registered office address of the CD in his name or registered office within a period not exceeding two years before the commencement of the insolvency process. Disclose the change in address and mention the same in all communications and records.

▪️An Interim Resolution Professional (IRP) or Resolution Professional (RP) may appoint any professional, including registered valuers, to assist in the discharge of their duties in the conduct of the CIRP. The amendment provides that the IRP/RP may appoint a professional other than the registered valuer, provided it feels that the services of such professional are required and such services are not available with the CD. Such appointments will be made on a fair basis following an objective and transparent process. The challan for the fee will be generated in the name of the professional and will be paid in his bank account.

▪️The RP is obliged to ascertain whether the CD deals with disputed transactions such as preferential transactions, low value transactions, extortionate credit transactions, trading fraud and wrongful trading. If so, he should file an application with the adjudicating authority i.e. judicial officer seeking appropriate relief. This would not only bring back the lost value in such transactions but would also discourage such transactions so as not to put pressure on the CD. Thus, it increases the possibility of restructuring the CD through a resolution plan. For effective monitoring, the amendment mandates that the RP should file Form CIRP 8 on the Board’s electronic platform itself, detailing its opinion and assessment in respect of the disputed transaction. IBBI has specified the format of CIRP 8 vide a circular issued yesterday. This form will be required to be filed in respect of each CIRP commissioned or commissioned on or after July 14, 2021.