IBBI gives “marketing” push to corporate insolvencies

Insolvency regulator IBBI has taken two big steps that are expected to give a fillip to corporate insolvency process in the country. First being the stipulation of marketing of assets in insolvency cases where the company’s book value of assets  exceeds ₹100 crore and the second allowing part sale of assets/business to more than one resolution applicants.

The Insolvency and Bankruptcy Board of India (IBBI) has now provided formulating a strategy to market assets of Corporate Debtor (CD) in consultation with the Committee of Creditors (CoC) to disseminate information about the asset to a wider and targeted audience of potential resolution applicants. 

The amendment enables a longer time for the asset in the market as the invitation for expression of interest in Form G has been advanced to 60th day from insolvency commencement date (ICD). Changes have also been made to Form G to provide more relevant information to persons for expressing interest, IBBI has said.

The latest IBBI move to stipulate framing of marketing strategy for assets sale of companies having more than ₹100 crore assets would transform the IBC resolution from being a process driven exercise to a product oriented offering with active marketing efforts, say experts.

“IBC resolution is now to be packaged as a product offering with active marketing efforts. With performance-based success fee structure for resolution professionals (RPs) notified recently, hopefully there would be concerted measures to attract more investors and more number of resolution plans will flow, in full or part, yielding value maximisation for the stakeholders”, Hari Hara Mishra, Director, UV ARC Ltd told BusinessLine.

G P Madaan, an advocate and Chairman of NCLT and IBC Committee of PHD Chamber of Commerce noted that the latest IBBI amendment on marketing of assets is silent on any timeline for the framing and implementation of the marketing strategy. He also said that marketing of assets of the corporate debtor would require outsourcing and would also entail additional cost, which the CoC in most cases would not be inclined to approve.

PART SALE OF ASSETS 

To maximise value in resolution, the latest IBBI amendment enables the resolution professional (RP) and the CoC to issue request for resolution plan a second time for sale of one or more of assets of the corporate debtor (CD) in cases where no resolution plan has been received for the corporate debtor as a whole. 

It enables for a resolution plan to include sale of one or more assets of CD to more successful resolution applicants submitting resolution plans for such assets and providing for appropriate treatment of the remaining assets.

The IBBI has also changed timeline for filing application for preferential and other transactions on or before 130th day of ICD. It provides that a copy of application made regarding preferential and other transactions be shared with the prospective resolution applicants to enable them to account for such information while proposing the resolution plan.

IBBI has also changed the timeline for submission of information memorandum to on or before 95th day from the ICD from 54th day. 

It also mandates that information memorandum should also include further relevant information such as operations of CD, financial statements, contingent liabilities, geographical coordinates of fixed assets, company overview. It also includes details of business evolution for CDs with asset size of more than ₹100 crore.

“With the latest changes, the information memorandum will be so detailed that it would look like a red herring prospectus filed for an IPO”, said an insolvency law expert.

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