In an effort to boost the valuations of stressed companies, IBBI revises regulations

20 Sept 2022 , 10:35 AM

The watchdog IBBI has revised its regulations to permit the sale of one or more assets of an organization undergoing an insolvency resolution process, among other adjustments, in a move that will improve market-linked solutions for stressed enterprises. A compromise or settlement for a corporate debtor during the liquidation stage can now also be considered by the Committee of Creditors (CoC).

The regulations were changed by the Insolvency and Bankruptcy Board of India (IBBI) with the "aim to maximize value in resolution," and they became effective on September 16.

Up to the end of June of this year, 1,703 Corporate Insolvency Resolution Processes (CIRPs) were liquidated.

When there are no resolution plans for the entire company, the regulator has given a resolution expert and the CoC permission to investigate selling one or more of the corporate debtor's assets.

The Market-Linked and Time-Bound Resolution of Stressed Assets is provided by the Insolvency and Bankruptcy Code (IBC).

A resolution plan may "include the sale of one or more assets of CD (Corporate Debtor) to one or more successful resolution applicants submitting resolution plans for such assets and providing for suitable handling of the remaining assets," according to the regulations as amended.

The IBBI (Insolvency Resolution Process for Corporate Persons) Regulations can be amended to allow for the marketing of a corporate debtor's assets, which will aid in the transmission of information to a targeted audience of people who may be interested in filing for bankruptcy.

The change also extends the asset's stay on the market, according to IBBI.

According to the IBBI weekly for the months of April through June, 1,703 Corporate Insolvency Resolution Processes (CIRPs) resulted in liquidation orders by the month's conclusion.

The total amount sought in these cases was Rs8.19 lakh crore, yet the properties themselves were only worth Rs0.59 lakh crore.

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