IBBI Amends Insolvency Norms for Personal Guarantors

New Delhi, Feb 6 (PTI) The Insolvency and Bankruptcy Board of India (IBBI) has amended norms pertaining to insolvency resolution process for personal guarantors and voluntary liquidation process.

Changes have been made to the Insolvency Resolution Process for Personal Guarantors to Corporate Debtors regulations and Bankruptcy Process for Personal Guarantors to Corporate Debtors regulations.

Restrictions have been removed for an Insolvency Professional (IP) to be appointed as a Resolution Professional (RP) for the process for personal guarantors.

In a release on Monday, IBBI said the removal of the restrictions will allow the same IP to get appointed in both the corporate process as well as the insolvency and bankruptcy proceeding of the personal guarantors to the corporate debtors for better harmonisation and effective coordination of both processes.

"The amendment removes restrictions on an IP to be appointed as RP or Bankruptcy Trustee (BT) in the insolvency resolution process or bankruptcy process of Personal Guarantors (PGs) to Corporate Debtors (CDs) respectively, if she has acted or is acting as interim resolution professional, RP or liquidator during the corporate insolvency resolution process (CIRP) or liquidation process of the CD," it said.

To address complexities and unique challenges inherent in the PG cases, IBBI said the amendments also aim to make the convening of meeting of creditors mandatory.

"This mandatory involvement of creditors brings a comprehensive and collaborative approach to the resolution process, enhancing the efficacy and fairness of the system.

"The amendment intends to foster active participation and cooperation among all stakeholders, thereby reinforcing a robust and equitable framework for addressing financial distress in PG cases," the release said.

Meanwhile, IBBI has amended the norms to streamline the voluntary liquidation process.

With the latest changes, directors of the corporate person while initiating the voluntary liquidation process should disclose pending proceedings or assessments before statutory authorities.

The directors also have to disclose pending litigations, which help to declare that sufficient provision has been made to meet all obligations, on account of pending proceedings, the regulator said in a separate release on Monday.

As per IBBI, if the liquidator fails to liquidate the corporate person within a stipulated period of 90 or 270 days, there should be a meeting of contributories of said corporate person and the liquidator should present a status report within 15 days from the end of such period, specifying reasons for delay.

The liquidator would also have to apprise the meeting of the additional time required for completing the process, the release said.

"In the period after submission of the final report but before a corporate person is dissolved, stakeholders claiming entitlement to funds in the corporate voluntary liquidation account can apply to the liquidator for withdrawal," it added.

Both amendments are effective from January 31.