Insolvency and Bankruptcy Board of India sets up online platforms amid Covid curbs

Economy


The Insolvency and Bankruptcy Board of India (IBBI) is setting up two online platforms for selling distressed assets under Insolvency and Bankruptcy Code, opening up markets for soured debt involving resolution plans, interim finance and liquidation assets.

The move will likely unlock big opportunities amid lockdown restrictions. This will likely make life easy for both investors and lenders dealing in thousands of crores of rupees.

The insolvency regulator has empanelled two agencies including National e-Governance Services Ltd and Mjunction Services Ltd, a joint venture between

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and SAIL, to provide platforms for distressed assets.

“The endeavour is to populate this market with many participants and empower them with complete information to enable them to offer best value in the interest of maximisation of value for stakeholders,” said M S Sahoo, chairperson at IBBI.

“This will make the market more transparent, and price discovery more efficient,” he told ET.

An insolvency professional can place requests for resolution plans and interim finance, or invite bids for liquidation assets, along with the required information. Similarly, interested resolution applicants (bidders), finance providers or buyers of assets can submit their offers on this platform.

While NeSL has just launched it, Mjunction is expected to go live in the next two weeks. IBBI chose to launch both the platforms as it helps break the monopoly. Although it is not mandatory for every insolvency case, it paves the way for faster resolution with two available options.

IBBI is now focusing more on pre-pack resolutions for millions of small businesses after the government amended the IBC through an Ordinance, enabling pre-packaged resolution schemes for micro, small, and medium enterprises (MSMEs) and allowing corporate debtors to propose a resolution plan for the stressed company.

“The market for resolution plans for an MSME firm is local, while the entire globe is the market for a bigger firm,” Sahoo said.

The resolution of stress of MSMEs, according to the chairperson, is unique in many ways such as the value of an MSME firm often lies in informal arrangements, making it difficult for a third party to harness value through a resolution plan.

“I would consider prepack for MSME, to start with, an experiment,” he said.

“In a sense, pre-pack is a liquidation-remote resolution mechanism.”

An outbreak of novel coronavirus is believed to have cut the pace of insolvency resolution processes amid administrative restrictions. But, IBBI chief seems to have seen a brighter side.

“The COVID-19 has increased the intensity and speed of churning, creating new sunrise and sunset businesses,” Sahoo said.

Even though National Company Law Tribunals operated digitally clearing cases, the regulator did not see any case for interruption. While some businesses would shrink or close, some would expand. New ones will open, and jobs and resources would move across firms and sectors.

“All this would necessitate the use of the Code, which is now fully available to resolve stress,” he said.



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