IBBI regulation IBBI/2019-20/GN/REG051 · 31 Jan 2024
Official title
IBBI (Bankruptcy Process for Personal Guarantors to Corporate Debtors) Regulations, 2019 (Amended upto 31-01-2024)
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These regulations establish the procedural framework for the bankruptcy process of personal guarantors to corporate debtors under the Insolvency and Bankruptcy Code, 2016. They define the eligibility, duties, and fee structures for bankruptcy trustees, including requirements for reporting, asset valuation, and the conduct of committee of creditors meetings. The regulations mandate specific procedures for the realisation of assets, including auction and private sale protocols, and outline the distribution of proceeds to creditors. Additionally, they provide for the handling of claims, the maintenance of records, and the management of unclaimed dividends. The regulations apply to all bankruptcy processes initiated against personal guarantors to corporate debtors, ensuring transparency and accountability throughout the administration of the bankrupt's estate.
What you must do
Key dates
Who is affected
Thresholds
Exceptions
If you do not comply
INSOLVENCY AND BANKRUPTCY BOARD OF INDIA (BANKRUPTCY PROCESS FOR PERSONAL GUARANTORS TO CORPORATE DEBTORS) REGULATIONS, 2019
[AMENDED UPTO 31.01.2024]
IBBI/2019-20/GN/REG051.- In exercise of the powers conferred by clause (t) of sub-section (1) of section 196, and clauses (zr) and (zs) of sub-section (1) of section 240 read with clause (e) of section 2 and section 60 of the Insolvency and Bankruptcy Code, 2016 (31 of 2016), the Insolvency and Bankruptcy Board of India hereby makes the following regulations, namely -
1. Short title, commencement and application. (1) These regulations may be called the Insolvency and Bankruptcy Board of India (Bankruptcy Process for Personal Guarantors to Corporate Debtors) Regulations, 2019.
(2) They shall come into force from the 1st day of December, 2019.
(3) These regulations shall apply to the bankruptcy process for personal guarantors to corporate debtors.
2. Definitions. In these regulations, unless the context otherwise requires, -
(a) “associate” in relation to a creditor, a bankruptcy trustee or professionals appointed by the bankruptcy trustee shall have the same meaning as assigned to it in relation to a debtor in sub-section (2) of section 79, as may be applicable;
(b) “bankruptcy process costs” shall mean - (i) the fees payable to the bankruptcy trustee; (ii) payments and expenses referred to in sub-regulation (1) of regulation 5, sub-regulation (4) of regulation 6, sub-clause (ii) of clause (c) and clause (f) of sub-regulation (3) of regulation 10, sub-regulation (3) of regulation 28, and sub-regulation (3) of regulation 31; (iii) such other costs and expenses directly relatable to the bankruptcy process, to the extent approved or ratified by the committee;
(c) “Code” means the Insolvency and Bankruptcy Code, 2016 (31 of 2016);
(d) “committee” means the committee of creditors as defined in sub-section (11) of section 79;
(e) “corporate debtor” means a corporate person for whom the guarantor has given a personal guarantee;
(f) “electronic means” means an authorised and secured computer programme which is capable of producing confirmation of sending communication to the participant entitled to receive such communication at the last electronic mail address provided by such participant and keeping record of such communication;
(g) “form” means a form appended to these regulations;
(h) “participant” means a person entitled to attend a meeting of the committee and includes a creditor, , bankrupt, bankruptcy trustee, and any other person authorised by the committee to attend such meeting;
(i) “registered valuer” means a person registered as such in accordance with the Companies Act, 2013 (18 of 2013) and the rules made thereunder;
(j) “related party” in relation to a corporate debtor shall have the meaning assigned to it in sub-section (24) of section 5;
(k) “section” means a section of the Code;
(l) words and expressions used and not defined in these regulations, but defined in the Code and the Insolvency and Bankruptcy (Application to Adjudicating Authority for Bankruptcy Process for Personal Guarantors to Corporate Debtors) Rules, 2019, shall have the respective meanings assigned to them in the Code and in the said rules.
3. Eligibility of bankruptcy trustee. (1) An insolvency professional shall be eligible to be appointed as a bankruptcy trustee for a bankruptcy process, if- (a) he, the insolvency professional entity of which he is a partner or a director, and all the partners and directors of the said insolvency professional entity are independent of the guarantor; (b) he is not subject to any ongoing disciplinary proceeding or a restraint order of the Board or of the insolvency professional agency of which he is a professional member; and (c) the insolvency professional entity of which he is a partner or a director, or any other partner or director of such insolvency professional entity does not represent any party in the bankruptcy process.
Explanation. - For the purposes of this sub-regulation, a person shall be considered independent of the guarantor, if he- (a) is not an associate of the guarantor; ^1[and] (b) is not a related party of the corporate debtor^2[.] ^3[***]
(2) A bankruptcy trustee, who has been an auditor of the guarantor at any time during the preceding three years, shall make a disclosure of remuneration received, year-wise for such audit, to the committee.
(3) An insolvency professional, other than who has filed an application under section 122 or 123 on behalf of a guarantor or a creditor, as the case may be, shall provide a written consent in Form A to the Adjudicating Authority before his appointment as bankruptcy trustee in a bankruptcy process.
4. Fees of bankruptcy trustee. (1) The bankruptcy trustee shall be entitled to such fee and the fee shall be paid in such manner as decided by the committee.
(2) In all cases other than those covered under sub-regulation (1), the bankruptcy trustee shall be entitled to a fee as a percentage of the amount realised from the estate of the bankrupt and of the amount distributed from such realisation, in accordance with Schedule I.
5. Appointment of professionals. (1) A bankruptcy trustee may appoint accountants, registered valuers, advocates or other professionals, as may be necessary, to assist him in the discharge of his duties, obligations and functions for a reasonable remuneration and such remuneration shall form part of the bankruptcy process cost: Provided that the following persons shall not be appointed under this regulation, namely- (a) a relative of the bankruptcy trustee; (b) a partner or director of the insolvency professional entity of which the bankruptcy trustee is a partner or director; (c) ^4[***] (d) an associate of the bankrupt; (e) a related party of the corporate debtor.
(2) Before appointing a professional under sub-regulation (1), the bankruptcy trustee shall obtain a disclosure of details of the existence of any pecuniary or personal relationship with any of the creditors, the bankruptcy trustee, the corporate debtor or the bankrupt, from the professional.
6. Registers and books. (1) Where the books of account of the bankrupt are incomplete on the bankruptcy commencement date, the bankruptcy trustee shall get them completed and brought up-to-date within sixty days of the bankruptcy commencement date.
(2) The bankruptcy trustee shall maintain cash book, ledgers, registers and such other books, as may be required for the administration of the estate of the bankrupt.
(3) Where the bankruptcy trustee is authorised to carry on the business of the bankrupt, he shall keep separate books of account in respect of such business and such books shall, as far as possible, be in conformity with the books already kept by the bankrupt in the course of its business.
(4) The bankruptcy trustee shall keep receipts for all payments made or expenses incurred by him in relation to the bankruptcy process.
7. Reports by bankruptcy trustee. The bankruptcy trustee shall prepare and submit the following reports to the Adjudicating Authority and the committee - (a) a preliminary report; (b) progress reports; and (c) a final report.
8. Preliminary report. (1) The bankruptcy trustee shall submit a preliminary report to the Adjudicating Authority and the committee within ninety days of the bankruptcy commencement date.
(2) The bankruptcy trustee shall send a copy of the preliminary report to the bankrupt at the time of submission of the report.
(3) The preliminary report shall include the following details- (a) a list of the assets and liabilities of the bankrupt as on the bankruptcy commencement date based on the books of the bankrupt: Provided that if the bankruptcy trustee has reasons to believe, to be recorded in writing, that the books of the bankrupt are not reliable, he shall also provide such estimates based on reliable records and data otherwise available to him. (b) the proposed plan of action in relation to administration of the estate, including the timeline in which it is proposed to be carried out and the estimated costs; (c) any further inquiry to be made in respect of the assets, business or affairs of the bankrupt; (d) details of the assets which are intended to be realised, including the following- (i) value of the assets, valued in accordance with regulation 33; (ii) intended manner of realisation of the assets and reasons thereof; (iii) expected amount of realisation; (iv) any other information that may be relevant for the realisation of the assets. (e) details of the excluded assets and other assets under sub-section (2) of section 155.
