Mutual FundTaxation

IBBI removes 30-day deadline for payment to operational creditors

The Insolvency and Bankruptcy Board of India has done away with the concept of dissenting financial creditors and removed the 30-day deadline for payment to operational creditors Clarifying a report by, Sanjeev Pandey, said, The regulations earlier provided payment of liquidation value to operational creditors within 30 days of approval of resolution plan and payment to dissenting financial creditors before any recovery is made by assenting financial creditors. The amendment has done away with the concept of dissenting financial creditors and removed the 30 days deadline for payment to operational creditors. On October 5, the Insolvency and Bankruptcy Board of India amended the IBBI Regulations, 2016 in which it said: In the principal regulations, in regulation 38 for sub-regulation (1), the following sub-regulation shall be substituted namely: (1) The amount due to the operational creditors under a resolution plan shall be given priority in payment over financial creditors.

Pandey clarified that the operational creditors still fall below financial creditors, employees and workers’ dues but will still get paid earlier whatever dues are allocated to them before any payment is made to financial creditors. The priority of distribution in any resolution plan follows the distribution waterfall mentioned under section 53 of the IBC Code, he said in a clarification statement. The operation creditor or their representatives can attend the CoC meeting only if the amount of their aggregate dues is not less than 10 percent of the debt, but do not have the right to vote in CoC, he added. The Insolvency and Bankruptcy Board of India amended the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 on October 5 and IBBI has no power to amend the Code which can only be amended by Parliament, it clarified. In the Code, the priority of payment in distribution of proceeds of liquidation lies with financial creditors, which remains unchanged.

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