Insolvency resolution plans should go beyond recasting liabilities: IBBI

NEW DELHI: Corporate insolvency resolution plans assembled by the creditors’ committee are expected to increase company value over the years in a sustainable manner, requiring strategies that go beyond simple restructuring of liabilities , said the Insolvency and Bankruptcy Board of India (IBBI).

In a post on its website, the lawmaker said a resolution plan requires the creditors’ committee to exercise a great deal of business wisdom.

“Such value maximization with sustained resolution requires strategies far beyond liability restructuring. This requires considerable business dexterity and acumen from CoC members,” IBBI said.

The regulator also said that with responsibility comes responsibility and since the decisions of the creditors’ committee have an impact on the life of a company and therefore on its stakeholders, it must be fair and transparent in its decisions.

IBBI’s view of the panel of creditors deciding the future of a troubled company comes in the context of policy makers’ efforts to improve the outcome of bankruptcy resolution.

The creditors’ committee has powers commensurate with its responsibilities, he said. Creditors can decide on a haircut of any magnitude to any of the stakeholders necessary to save the business and research and choose the best resolution plan on the market, unlike other avenues that allow creditors to find resolution only with existing promoters.

IBBI said a resolution plan may result in a change in management, technology or product portfolio and the acquisition or sale of assets, businesses or businesses. It may also involve restructuring the organization, its business model or its ownership.

“Its decisions must increase the value of the business, which is valued at 100 at the start of the resolution process, at least 101 the following year, 102 the following year, and so on,” IBBI said.

The regulator is raising awareness of the role played by the creditors’ committee as an institution of public faith and building the capacity of institutional creditors to ensure that the committee discharges its statutory duties and responsibilities with the utmost great care and diligence.

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