IBBI amends Regulations to boost the Value of Stressed Companies

Multiple revisions and clarifications made by the Insolvency and Bankruptcy Board of India (IBBI) to the Insolvency and Bankruptcy Code would assist creditors in obtaining a higher price for distressed assets. The regulatory body has implemented the separation of firms in order to attract more participants in the corporate resolution procedure.

This would be advantageous in situations involving real estate players and other businesses with several projects, not all of which may be feasible, or where certain assets may yield greater value.

This action will also facilitate the dissolution of insolvent conglomerates into separate enterprises.

To maximise value, the amendment permits the resolution professional (RP) and the committee of creditors (CoC) to issue a second request for a resolution plan for the sale of one or more of the corporate debtor’s (CD) assets in cases where no plan has been received for the corporate debtor as a whole.

It permits a plan to include the sale of one or more assets of CD to one or more successful resolution applicants submitting plans for such assets and allowing for the proper treatment of the remaining assets, according to the regulator.

New Pay Structure for Resolution Professionals

IBBI has also implemented a performance-based compensation system for RPs. IBBI has established for the first time a minimum fixed fee for RPs, who can now earn between Rs 1 lakh and Rs 5 lakh per month depending on the quantity of claims admitted.

Moreover, incentives have been incorporated for both prompt resolution and value maximisation. If the resolution plan is presented to the National Company Law Tribunal (NCLT) in fewer than 165 days, the RP is now entitled to one percent of the realisable value. If the plan is not presented within 330 days, the RP will receive nothing.

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