Feature Article (cont'd)
Key Takeaways for International Creditors
Involvement of specialized professionals: The Regulations require a licensed insolvency professional (“IP”) to act as liquidator, which is a marked departure from the previous system where this role was performed by a government official. The Indian Government has separately notified a process for licensing and regulating IPs; the process is to be monitored by a specialist regulatory body known as the Insolvency and Bankruptcy Board of India (the "IBBI") that was constituted in October 2016 and became operational in December 2016. However, given the absence of precedents under the Regulations and the bespoke nature of corporate debt liquidations, it may be a while before we have a sufficiently large pool for professionals with the required practical experience to effectively administer the Regulations.
Oversight of the liquidator by a dedicated authority: IPs must conduct the liquidation under the overall supervision of the National Company Law Tribunal (the "NCLT"), a dedicated quasi-judicial authority set up to deal with company law matters and to reduce the backlog of such matters before Indian courts. As the NCLT was only constituted in June 2016 (after an almost 2 year delay), its bandwidth and expertise to deal with corporate debt liquidations is currently untested.
The liquidator must submit reports to the NCLT as detailed below. The Regulations do not contain any materiality threshold in this regard and IPs could therefore be saddled with fairly onerous reporting requirements if, for example, the liquidation involves a large number of asset sales.