IBBI vide its notification dated July 03, 2018 has issued IBBI (Insolvency Resolution Process for Corporate Persons) (Third Amendment) Regulations, 2018 (“Amended Regulations” for short) which amends the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 (“Principal Regulations” for short). The Amended Regulations inter alia provides for introduction of new forms, term of interim resolution professional, time line for the submission of claim, procedure for withdrawal of an application, provisions relating to invitation of expression of interest etc.

Amended Regulations provide as follows:-

1. New definition of ‘class of creditors’ is inserted in Regulation 2 of Principal Regulations:-

   (aa) “class of creditors” means a class with at least ten financial creditors under clause
   (b) of sub-section (6A) of section 21 and the expression, “creditors in a class” shall be
   construed accordingly.

   Explanation :  Section 21 (6A) (b) deals with the class of creditors, other than the creditors who are part of consortium or the class of creditors whose debt are in the form of securities /deposits . Through insertion, number has been specified that would constitute such class of creditors and after such constitution of class of creditors comprising of at least 10 financial creditors, application will be filed by resolution professional, authoring the insolvency professional to act as authorized representative for such class of creditors.  

2. Regulation 3 dealing with provision of eligibility of resolution professional has been amended.  Through amendment, a person/employee of a legal/consulting firm that had entered in any transaction with the corporate debtor amounting to 5% of its gross turn over (which earlier was 10%), will be eligible to be appointed as Resolution professional for such corporate debtor. Further, new form is introduced for appointment of resolution professional, through insertion of sub regulation 1A in regulation 3 of principal regulations, which is as follows:

   “(1A) Where the committee decides to appoint the interim resolution professional as resolution professional or replace the interim resolution professional under section 22 or replace the resolution professional under section 27, it shall obtain the written consent of the proposed resolution professional in Form AA of the Schedule.

3. Insertion of regulation 4A in Principal Regulations. 

   “4A. Choice of authorised representative

   (1) On an examination of books of account and other relevant records of the corporate debtor, the interim resolution professional shall ascertain class(s) of creditors, if any (2) For representation of creditors in a class ascertained under sub-regulation (1) in the committee, the interim resolution professional shall identify three insolvency professionals who are-

   (a) not his relatives or related parties;

   (b) eligible to be insolvency professionals under regulation 3; and

   (c) willing to act as authorised representative of creditors in the class.

   (3) The interim resolution professional shall obtain the consent of each insolvency professional identified under sub-regulation (2) to act as the authorized representative of creditors in the class in Form AB of the Schedule.”

4. Insertion of two clauses i.e. clause (ba) and (bb) in Regulation 6 of Principal Regulations.

   “(ba) state where claim forms can be downloaded or obtained from, as the case may be;

   (bb) offer choice of three insolvency professionals identified under regulation 4A to act as the authorized representative of creditors in each class

   Further, expenses incurred on public announcement shall form part of insolvency resolution process cost, which earlier was not included.

   Explanation : The amended regulations through this insertion require interim resolution professional to mention the details from where forms can be downloaded by the creditors/claimants and also to offer them the choice of appointing their authorized representative out of the 3 insolvency professionals identified by him under regulation 4A of Principal Regulations. Insolvency professional, who is the choice of the majority creditors in the class, shall be appointed as authorized representative of the creditors of the respective class.

5. Amendments in Regulation 7 & 8 of Principal Regulations which deals with submission of claims by operational creditors and financial creditors respectively. 

   For the words “submit proof of claim”, the words “submit claim with proof” is substituted. Further, regulation 8A is inserted dealing with the submission of ‘claims of creditors in a class’. 

   Explanation:  Through amendment, it is clarified that ‘financial creditors’ and ‘financial creditors belonging to a class of creditors’ are two separate categories and accordingly they have to submit their claims to IRP/RP,  in their respective forms. Form C is for ‘financial creditors’ and ‘Form CA’ introduced through amended regulations is for the creditors in a class.

6. Regulation 12 of Principal Regulations dealing with the ‘submission of claims’ has been substituted. Erstwhile provision provided that if a creditor failed to submit a claim on or before the last  date mentioned in public announcement , he can submit the same till the approval of resolution plan.  Amended Regulations now provides for the time limit within which claim can be submitted by creditors. Now a creditor, failed to submit a claim on or before the last date mentioned in public announcement, can submit its claim on or before 90th day of the insolvency commencement date.
7. Insertion of Regulation 16A and 16B in Principal Regulations. The new regulation inter alia provides for the appointment of authorized representatives of the creditors of specific class, calculation of amount for ascertaining voting rights to be inclusive of rate of interest of 8% p.a. where it has not been agreed to between the parties in case of creditors in a class, the fees of authorized representatives for the meetings attended by him etc.  Further, it is clarified that where the corporate debtor has only creditors in a class and no other financial creditor eligible to join the committee, the committee of crediotrs shall consist of only the authorized representative(s).
8. Regulation 17 of the Principal Regulations has been substituted. Heading of Regulation 17 has been substituted from “First meeting of the committee” to “Constitution of committee”. Through amendment, time limit of 2 days is specified for filing report certifying constitution of the committee by IRP and thereafter IRP shall conduct the first meeting of Committee within 7 days of filing such report.  Further, clarification is provided regarding the term of IRP, where there is delay in the appointment of resolution professional, IRP shall perform the functions of the resolution professional from the 40th day of the insolvency commencement date till resolution professional is appointed under section 22 of the Code.
9. Regulation 19 of the Principal Regulation dealing with ‘Notice for meetings of the committee’ is amended. Through amendment, time limit of 7 days for sending notice for meetings of the committee is now reduced to 5 days.
10. Regulation 25 of the Principal Regulation dealing with ‘Voting by the committee’ is substituted. Through amendment, it is clarified that voting of the members, on any item listed, shall be done by the resolution professional with the members present in the meeting after discussing on the same. Further, the resolution professional shall circulate the minutes of the meeting by electronic means to all members of the committee within 48 hours of the conclusion of the meeting and seek a vote of the members who did not vote (including members of CoC which were not present) at the meeting on the matters listed for voting by electronic voting system which shall be kept open for 24 hours from the circulation of the minutes.
11. Omission of Sub Regulation (2) of Regulation 26 of Principal Regulations. Amendment, allows the members of committee to change their vote, which earlier was not allowed.
12. Regulation 27 of the Principal Regulation dealing with ‘Appointment of registered valuers’ is substituted. Time limit is further specified for the appointment of registered valuers. Resolution professional has to appoint 2 registered valuers within 7 days of his appointment, but not later than 47th day from the insolvency commencement date. Such deadline of 47 days was not provided earlier. Further, if IRP is continued beyond time prescribed, he has to undertake functions of RP and perform such duties including appointment of registered valuers.
13. Regulation 29(2) of the Principal Regulation dealing with ‘Sale of assets outside the ordinary course of business’ is substituted. Amendment provides that in any circumstances resolution professional is of view that sale of assets is necessary, approval of the members of committee is required having voting share of 66%.
14. Insertion of Regulation 30A in Principal Regulations. Inserted regulation provides for procedure of withdrawal of application made under section 12A of Code (inserted through amendment 2018). If committee of creditors  with 90% voting share gives their approval for withdrawal of application, application may be filed by interim resolution professional before the invitation for expression of interest, along with a bank guarantee towards estimated cost incurred for certain purposes under the process. The application is required to be filed in the form FA within 3 days of approval by committee of creditors.
15. Insertion of two clause i.e. (aa) and (ab) in Regulation 31 of the Principal Regulations, dealing with the ‘Insolvency Resolution process costs’, which is as follows;

    “(aa) fee payable to authorized representative under sub-regulation (7) of regulation 16A;

    (ab) out of pocket expenses of authorized representative for discharge of his functions under section 25;”.

16. Regulation 35A of Principal Regulations is substituted. Earlier Regulation 35A dealt with the Identification of Resolution Applicant where resolution professional had to identify the prospective resolution applicant within 105 days of insolvency commencement date, however such provision now has been substituted. Amended Regulations, now deal with the ‘Preferential and other transactions’, where resolution professional forms an opinion whether the corporate debtor has been subjected to certain transactions (preferential transactions, undervalued transactions, extortionate transactions or fraudulent transactions) by 75th day and he shall make a determination of the same by 115th day of the insolvency commencement date to the IBBI and he shall apply to the Adjudicating Authority for appropriate relief before 135th day of the insolvency commencement date.
17. Regulation 36 of Principal Regulation dealing with ‘Information Memorandum’ is amended. Amendment provides that resolution professional shall submit the information memorandum in electronic form to each member of the committee within two weeks of his appointment, but not later than 45th day from the insolvency commencement date, whichever is earlier. Such deadline of 45 days was not provided earlier. 
18. Regulation 36A in Principal Regulations, titled “Invitation of Resolution Plans” is now substituted with “Invitation of Expression of interest”.  Amendment provides as follows;
• Resolution professional shall publish an invitation for expression of interest in the prescribed form i.e. Form G, by the 75th day from the insolvency commencement date. The invitation shall specify the criteria, ineligibility, the last date for submission of EoI and other details and shall not require payment of non-refundable deposit. Further, it is clarified that EoI received after the specified time, shall be rejected.
• Prospective resolution applicants shall inter alia, give undertaking that they meet the criteria specified by committee of creditors, they are eligible to submit their resolution plans in terms of section 29A, maintain the confidentiality of the information etc.
• Thereafter, resolution professional shall conduct due diligence based on material on record and issue a provisional list of prospective resolution applicants within 10 days of the last date of submission of EoI. And upon considering objections to the provisional list, the resolution professional shall issue the final list of prospective resolution applicants, within 10 days of the last date for receipt of objection.
19. Insertion of Regulation 36B in Principal Regulations. New Regulation deals with the ‘Request for resolution plans’, wherein resolution professional has to issue information memorandum, evaluation matrix and requests for resolution plan within 5 days of date of issue of provisional list of eligible prospective resolution applicants.

    Prior to the amendment, information memorandum was required to be issued separately within 2 weeks of the appointment of resolution professional and evaluation matrix was required to be submitted with EOI separately or incase where the invitation did not contain the evaluation matrix, then the resolution professional had to issue the evaluation matrix to the prospective resolution applicants at least fifteen days before the last date for submission of resolution plans.

    Amended regulations, inter alia, further provides that the prospective resolution applicants shall be allowed a minimum of thirty days to submit the resolution plan(s).

20. Insertion of clause (ca) in Regulation 37 of Principal Regulations, allows the cancellation or delisting of any shares of the corporate debtor, if applicable, pursuant to a resolution plan.
21. Regulation 38 of the Principal Regulations dealing with “Mandatory contents of the resolution plan” has been amended. It is clarified that funds will be first used to pay the insolvency resolution process cost, to the extent unpaid. Further, a resolution plan shall demonstrate that it addresses the cause of default, it is feasible and viable, has provisions for its effective implementation, has provisions for approvals required and the timeline for the same, the resolution applicant has the capability to implement resolution plan.
22. Sub regulation 1 of Regulation 39 of the Principal regulations has been substituted and now inter alia provides that the prospective resolution applicant in the final list may submit resolution plan along with an affidavit stating its eligibility u/s 29A, undertaking to the effect that it will provide additional funds, if required for meeting insolvency resolution process costs, an undertaking inter alia to the effect that information and records provided in connection with resolution plan are true and correct. Further the amended regulation provides that a resolution professional is required to submit a compliance certificate in Form H along with Resolution Plan.
23. Regulation 40A has been inserted which provides model timeline for CIRP.