In what could result in a complete overhaul of the Insolvency and Bankruptcy Code (IBC), the insolvency regulator has sought public comments on the regulations it notified under the code to date.
The Insolvency and Bankruptcy Board of India (IBBI) has given a window of eight months ending December 31 to all stakeholders to share their views on its regulations.
IBBI has called the exercise “crowdsourcing of ideas”.
The insolvency regulator also said that it will process all the comments together and following the due process, it will modify the regulations to the extent considered necessary.
IBBI will then modify the regulations by March 31, 2024 and bring them into force on April 1, 2024.
The focus of this exercise, experts said, is to ease the admission process, streamline resolution, role of service providers, and use of technology.
“The goal is to control time overrun, which has brought a lot of uncertainty.
"As of December 22, resolution time taken is 587 days, which is more than twice stipulated time of 270 days,” an industry expert said.
While inviting public comments, the IBBI said the participation of the public, particularly the stakeholders in the insolvency ecosystem, ensures that regulations are informed by the legitimate needs of those interested in and affected by the regulations.
“In a dynamic environment, despite the best of efforts and intentions, a regulator in such a novel and emerging regulatory regime may not always be able to address the ground realities,” the IBBI said.
Calling it a step in the right direction, industry representatives have said that a completely revamped set of IBBI regulations would reinforce the confidence in delivery expectations around IBC.
“In the Budget 2023 speech by the finance minister, there was explicit reference to financial regulators to carry out a comprehensive review of existing regulations, in consultation with all stakeholders… In IBC, several new challenges have come up in recent times,” Hari Hara Mishra, chief executive officer of ARC Association, said.
The regulations on which the IBBI has sought public comments include insolvency resolution process for corporate persons, liquidation process, fast track insolvency resolution for corporate persons, bankruptcy process for personal guarantors to corporate debtors’ regulations and pre-packaged insolvency resolution process among others.
“IBC law is evolving fast, based on various judicial pronouncements, typical situations of companies getting admitted.
"Government and regulators have always responded to these developments and made amendments several times.
"Now the regulator wants a comprehensive review of all regulations to date.
"It is a good idea to go for holistic overhaul of regulations rather than making piecemeal changes,” said Manoj Kumar, partner, Corporate Professionals.
Stakeholders can give general comments on any inconsistency between the provisions in any regulations with those in the rules or any difficulty in the implementation of any provision.
IBBI has sought comments from companies, debtors, insolvency professionals and their agency, personal guarantors, proprietary firms, partnership firms, academics and investors, among others, to get ideas for creating a more conducive regulatory framework.
“The stakeholders may contemplate, at leisure, the important issues in the extant regulatory framework that hinder transactions and offer alternate solutions to address them,” the IBBI said.
IBBI has sought comments on insolvency resolution process for corporate persons, liquidation process, fast track insolvency resolution for corporate persons, bankruptcy process for personal guarantors to corporate debtors’ regulations and pre-packaged insolvency resolution process.
IBBI to process all comments together and then make necessary modifications by March 31, 2024.
The changes will come into effect from April 1, 2024.
The exercise is likely to ease admission process, streamline resolution, role of service providers, and use of technology.