India – Insolvency And Bankruptcy Code 2016 Update.

 

23 June, 2017

 

On Wednesday, June 21 2017, the board of the Securities and Exchange Board of India (‘SEBI’), India’s securities market regulator, confirmed that it would provide an exemption from open offer obligations, under the Indian takeover regulations for acquisitions pursuant to resolution plans approved by NCLT under the Insolvency and Bankruptcy Code, 2016 (‘IBC’).
 
Relaxations from preferential issue requirements under SEBI's issue of capital and disclosure regulations and from open offer obligations under Indian takeover regulations are currently available for lenders undertaking restructuring of listed companies in distress through the strategic debt restructuring (‘SDR’) scheme. The SEBI board also confirmed that it would extend these relaxations to new investors acquiring shares in distressed companies pursuant to such restructuring schemes (i.e., SDR). These relaxations will be subject to conditions like a three-year lock-in of shareholding and an approval of the company's shareholders by special resolution. 
 
The SEBI board also decided to extend the above relaxations to lenders under other restructuring schemes undertaken in accordance with guidelines of the Reserve Bank of India (‘RBI’).
 
The above measures will be implemented by formal amendments by SEBI of the relevant regulations, which are awaited.
 
Just over a week ago the RBI announced that it is in the process of revising provisioning norms for cases referred to the corporate insolvency resolution process (‘CIRP’) under the IBC. These revised norms are awaited.
 
Some of the above SEBI relaxations have been in the making since the IBC was notified at the end of 2016. They will be welcomed by lenders and other stakeholders involved in dealing with stressed assets (including those where the RBI directed banks to push into the CIRP last week). This shows yet again, the unprecedented sense of purpose in the government and regulatory bodies  to provide the tools and flexibility to deal with the stressed assets problem.

 

 

For further information, please contact:

 

Zia Mody, Partner, AZB & Partners

zia.mody@azbpartners.com