The Insolvency and Bankruptcy Board of India (IBBI) has revised norms to bar any entity or person that is not eligible to submit a bankruptcy resolution plan from entering into any compromise or arrangement related to the firm or asset undergoing proceedings.
The move is aimed at stopping former promoters or defaulters from purchasing from other buyers or creditors to take control of the stressed firm.
Normally under the IBC process, if a stressed firm is unable to find a resolution plan within 330 days of its admission to the insolvency court, it goes for liquidation.
Moreover, the revised norms state that a secured creditor cannot sell or transfer an asset, which is subject to security interest, to a person or entity that is not eligible under the Insolvency and Bankruptcy Code (IBC) to submit a resolution plan.
Further, a secured creditor that proceeds to realise its security interest shall contribute its share of the insolvency resolution process cost, liquidation process cost and workmen’s dues within 90 days of the liquidation commencement date.
"It will also have to pay excess of realised value of the asset, which is subject to security interest, over the amount of its claims admitted, within 180 days of the liquidation commencement date. Where the secured creditor fails to pay such amounts to the liquidator within 90 days or 180 days, as the case may be, the asset shall become part of liquidation estate," the amended notification said.
The revised norms provide that a liquidator shall deposit the amount of unclaimed dividends and undistributed proceeds along with any income earned from the things just mentioned into a liquidation account before submitting an application for dissolution of the corporate debtor.
The revised norms also provide a process for a stakeholder to seek withdrawal from the liquidation account.