IBBI amends CIRP Regulation by relaxation timeline due to COVID-19 outbreak
The press note on the lockout notification reads as follows: In order to solve this dilemma, the IBBI amended the CIRP Regulations to ensure that the lockout period enforced by the Central Government following the outbreak of COVID-19 is not to be counted for the purposes of the time-line for any operation that could not be completed as a consequence of the lock-down.
IBBI amends the CIRP Regulations to include relaxation due to the COVID-19 outbreak in the corporate insolvency resolution process
- However, it would be subject to the overall time limit set out in the Code. Why does the word ‘subject to the Code’s complete time limit? Will that mean you have to stick to the periods of 180/270/330 days.
- The only relaxation is in respect to the prescribed timelines for the different activities for which relaxation was given. Was my interpretation inter alia LINK
The IBC (Amendment) Ordinance, 2020
- The Ordinance prohibits the initiation of insolvency applications for defaults occurring within six months of March 25, 2020. (extendable up to one year).
- A director or a partner may be made responsible if, despite knowing that insolvency proceedings are unavoidable, he failed to exercise due diligence in reducing the possible loss to creditors. This Ordinance removes above said provision for defaults in the above mention period.
What are the Key Issues & its Analysis
- The suspension of the insolvency resolution process raises several issues.
- This IBC ordinance is prohibiting resolution even in cases where that may be the best way to preserve value of assets.
- Insolvency and Bankruptcy Code (Amendment) Ordinance, 2020 removes the option of a debtor to avail of the insolvency resolution process by way of restructuring.
- IBC ordinance 2020 is unclear why insolvency proceedings against identified precisely specified defaults have been prohibited forever.
- This is controversial issue that whether a personal guarantor to a corporate debtor should be subjected to insolvency proceedings for defaults for which insolvency proceedings are not allowed against the debtor
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