market valuation of insolvent companies; Amendment of rules in the resolution process

New Delhi :The Insolvency and Bankruptcy Board of India – IBBI has amended the rules of insolvency resolution process to provide better market valuation for debt-ridden companies. In addition to the new changes, the Committee of Creditors (CoC) can now examine whether settlement or other options are available to creditors during the period of insolvency.

The Insolvency and Bankruptcy Code provides a market-linked and time-bound resolution process for stressed assets and is regulated by the Insolvency and Bankruptcy Board of India. As of June 1 this year, 1,703 companies have been closed in bankruptcy proceedings, most of which are heavily indebted to banks and financial institutions.

The Insolvency and Bankruptcy Board of India has amended the rules with a view to maximize value in the resolution process and the new rules have come into effect from 16 September.

As per the new rules, the resolution professional (RP) and the committee of creditors are allowed to explore and try the option of sale of one or more assets of the concerned corporate debtor in cases where there is no resolution plan for the entire business. .

Gaurav Gupte, partner at accountancy firm Cyril Amarchand Mangaldas, said the new amendments to the rules will lead to better market-based solutions for insolvency resolution and give stressed assets more time to test market opportunities.

Recovery amount..

In 1,703 corporate insolvency resolution cases disposed of by Avasion or in winding up of companies till the end of June this year, a total of Rs 8.19 lakh crore was claimed by creditor banks and financial institutions, but the actual valuation of the assets of these companies was just 0.59. Lakh Crore.. The resolution process took an average of 428 days to reach its final conclusion. On the other hand, 374 cases of bad debt companies have been completely closed as of June 2022. A total of Rs 71,766.03 crore was claimed by creditor banks and financial institutions in these 374 cases, but their assets were assessed at only Rs 3,046.17 crore. Rs 2,936.20 crore has been recovered by winding up these companies along with their assets.

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