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A class of creditors may soon be allowed to seek an alternate ‘Authorised Representative’ (AR) to represent their claims and deal with their grievances if they are not satisfied with the performance of their present AR.
The Insolvency and Bankruptcy Board of India (IBBI) proposes to amend the Corporate Insolvency Resolution Process (CIRP) to enable the creditors in a class to replace an AR with 66 per cent of voting power of the class, similar to the replacement of a Resolution Professional (RP) in a CIRP. The insolvency regulator has sought public comments on this through a discussion paper.
Currently, there is no explicit provision for the replacement of an AR once he/she is appointed by the Adjudicating Authority.
The IBBI also proposes to amend CIRP regulations to stipulate that where more than one compliant resolution plan is available, both/all the plans should be put to vote simultaneously. The plan that receives the highest affirmative votes — subject to receiving the requisite 66 per cent — may be regarded as approved by the Committee of Creditors (CoC), the IBBI discussion paper has said.
Experts’ take
“The proposed amendments to the CIRP regulations are largely in the right direction,” said Manmeet Singh, Partner at law firm L&L Partners. “While the insertion of an enabling provision for the replacement of authorised representative is a positive, the option of the class should not be restricted to three alternative IPs proposed by the RP, and creditors in a class with 10 per cent voting rights who seek the replacement should also be given the freedom to propose the appointment of any other IP. This will ensure greater transparency in situations where there is lack of trust with the RP him/herself.
“The proposed amendment to the regulations concerning voting by the class is meant to iron out the creases and will enable the class to take an informed view after having had the benefit of reviewing the minutes of the CoC meeting.
“As regards voting on more than one compliant plan simultaneously, the same is perhaps in view of the Jaypee Infratech experience. However, it may have the unintended consequence that a plan which does not maximise value may get approved because it gets the maximum votes. This may raise doubts about the sanctity of the process.”
Consolidating fragments
Vidisha Krishan, Partner, MV Kini & Co, said:“All the recent amendments focus on consolidating fragments in the present timelines and procedure. The amendments relating to the AR voting for a class of investors throughout the resolution process irrespective of stage will provide a less fragmented voting pattern. Clarity has been added on the process of removal of an AR in case the present class of creditors is unhappy with their representative.
“On the issue of voting on two qualifying resolution plans , this, too, in its area consolidated several overlapping steps, giving a quicker disposal of equivalent resolution plans. Simultaneous voting will also allow for a better comparative analysis of the two equal plans at the time of granular discussion and debate, and allow for a better maximisation of value derived.”
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