India – Insolvency Resolution Plan To Contain Detailed Background Of Applicants Including Criminal Convictions.

The Insolvency and Bankruptcy Board of India (“IBBI”) has amended the (i) Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016, and (ii) Insolvency and Bankruptcy Board of India (Fast Track Insolvency Resolution Process for Corporate Persons) Regulations, 2017 (collectively referred to as “Regulations”) operational under the Insolvency and Bankruptcy Code, 2016 (“Code”).

 

The amendment stipulates that a resolution plan is to required to disclose certain specific details relating to the ‘credibility’ of the resolution applicant and any “connected persons”. For the purposes of these regulations “connected persons” has been defined as

 

• persons who are promoters or in the management or control of the resolution applicant (in case the resolution applicant is a body corporate); or
• persons who will be promoters or in management or control of the business the corporate debtor during the implementation of the resolution plan; or
• holding company, subsidiary company, associate company and related party of the persons referred to in items (a) and (b).

 

The details which need to be submitted regarding the resolution applicant as well as any “connected person” relates to their background, and includes:

 

• any conviction for an offence in the past five years;
• pending criminal proceedings;
• identification as a “willful defaulter” under the regulations of the Reserve Bank of India;
• debarment from the securities markets by the Securities & Exchange Board of India;
• details regarding any disqualifications from acting as a director under the Companies Act, 2013; and
• details of any transactions, undertaken with the corporate debtor in the past two years.

 

The amendment further specifies that the resolution professional shall now mandatorily submit the details of any preferential transactions, undervalued transactions, extortionate credit transactions or any fraudulent transactions undertaken by the corporate debtor and any consequent orders of the National Company Law Tribunal in respect of such transactions.

 

The additional information regarding the background of the resolution applicant and “connected persons” is intended to assist the committee of creditors ascertain the credibility of the applicants and to avoid plans which may lead to unwarranted circumstances such as liquidation post resolution.

 

This amendment comes in the light of the IBBI striving to ensure that a credible resolution plan is adopted which has the possibility of maximizing the value of assets of the corporate debtor.

 

 

For more information, please contact:

 

Sameer Sibal, Partner, Jerome Merchant + Partners

sameer.sibal@jmp.law