In a major relief to the creditors, the Insolvency and Bankruptcy Board of India made amendments in the Insolvency Resolution Process, allowing companies the flexibility to replace its liquidator during a voluntary liquidation process. According to the latest change, the existing liquidator can be replaced by appointing another insolvency professional as liquidator by a resolution of members, partners, or contributors. The Insolvency and Bankruptcy Code, 2016, envisages the appointment of an authorised representative (AR) by the Adjudicating Authority to represent financial creditors in a class, like allottees under a real estate project, in the committee of creditors, said a statement by the Ministry of Corporate Affairs.
In the new process, the interim resolution professional will have to offer a choice of three Insolvency Professionals (IP) in the public announcement and the creditors to choose one of them to act as their authorised representative. Also, the three Insolvency Professionals must be from the State or Union Territory, which has the highest number of creditors in the class. The government said that the latest move will facilitate ease of coordination and communication between the Adjudicating Authority and the creditors in the class he represents.
“IBBI has introduced a significant change in the process of approval of the resolution plan and with the latest amendment, all compliant plans will be put up for vote and lenders will have an option to vote for multiple plans,” said Rajiv Chandak, Partner, Deloitte India. This is an outcome of recent NCLAT judgement to allow voting on two plans simultaneously, he added.
According to the latest amendment, the committee of creditors shall vote on all compliant resolution plans simultaneously after the evaluation of all compliant resolution plans as per the evaluation matrix. Further, the resolution plan which receives the highest votes, but not less than sixty-six percent of voting share, shall be considered as approved.
“The tiebreaker formula could soon be the most important factor in a resolution plan getting selected and like liquidation value, the treatment of this formula would also be the subject to significant scrutiny,” said Veena Sivaramakrishnan, Partner at Shardul Amarchand Mangaldas & Co. A detailed process of parallel voting ought to meet the intended result of value maximisation for the creditors and stakeholders, she added.