Insolvency and Bankruptcy Board of India has amended norms to ensure transparency
In order to bring greater clarity and transparency in the insolvency process, the Insolvency and Bankruptcy Board of India (IBBI) has effected changes in the regulations meant for corporate insolvency proceedings, under which a resolution professional will have to give details of his or her opinion on avoidance transactions linked to a corporate debtor.
IBBI has done this by amending the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations.
A statement issued by the Ministry of Corporate Affairs on Wednesday said that the changes will bring in greater "discipline, transparency, and accountability in corporate insolvency proceedings".
A resolution professional is duty-bound to find out if a Corporate Debtor (CD) has been subject to avoidance transactions, namely, preferential transactions, undervalued transactions, extortionate credit transactions, fraudulent trading and wrongful trading, and file applications with the adjudicating authority seeking appropriate relief, the statement added.
"This not only claws back the value lost in such transactions increasing the possibility of reorganisation of the CD through a resolution plan, but also disincentivises such transactions preventing stress to the CD," it informed further.
As per the amendments, the resolution professional has to file Form CIRP 8 electronically on IBBI's platform, informing about his or her opinion related to avoidance transactions. CIRP stands for Corporate Insolvency Resolution Process.