Further to the following circulars issued by Insolvency and Bankruptcy Board of India and SEBI regulations, from to time, guidance note for Companies undergoing Corporate Insolvency Resolution Process was issued by BSE and NSE on 9th July 2021 covering the following provisions:

Circular No. IP/002/2018 January 3, 2018, issued by Insolvency and Bankruptcy Board of India, directed that while a person is acting as an Interim Resolution Professional, a Resolution Professional, or a Liquidator for a corporate person under the Code, he shall exercise reasonable care and diligence and take all necessary steps to ensure that the corporate person undergoing any process under the Code complies with all the applicable laws including SEBI (Listing Obligations and Disclosure Requirements)Regulations, 2018.

SEBI(Listing Obligations and Disclosure Requirements) Regulation, 2015(‘LODR Regulations’) as amended in the year 2018 vide SEBI (Listing Obligations and Disclosure Requirements) (Third Amendment) Regulations,2018 and Point 16 was inserted in Para A of Part A of Schedule III of LODR Regulations w.e.f. May 31, 2018 which mandated disclosures at various stages by the companies undergoing Corporate Insolvency Resolution Process (“CIRP”). This was further amended by the SEBI (Listing Obligations and Disclosure Requirements) (Amendment) Regulations, 2021 which enhanced the disclosure requirement w.e.f. January 08, 2021.

Further in consultation with SEBI, the following disclosures shall also be submitted to the Exchange in addition to those already prescribed under the LODR Regulations:

  • Prior intimation of at least two working days intimating about the date of hearing where NCLT would be considering the Resolution Plan.
  • Disclosure of the approval of Resolution Plan to be made to the Exchange on the oral pronouncement or otherwise of the Order on immediate basis and not later than 30 minutes.
  • The Resolution Professional shall inform through the Exchange platform any impact on the existing holders / investors of listed securities on areas such as status of listing, the value of holding of existing holders, write off/ cancellation/ extinguishment of existing equity shares/ preference shares/ debentures, etc. without any payment to such holders, where applicable.
  • Companies/Resolution Professionals are advised to be guided by the provisions of the LODR Regulations and advised to maintain the confidentiality of the Resolution Plan until details are not submitted on the Exchange Platform.

Under this framework, the Exchanges will issue a detailed guidance note to companies undergoing Corporate Insolvency Resolution Process (CIRP) and the Resolution Professional (RP) on compliance and disclosure requirements as per SEBI’s (Listing Obligations and Disclosure Requirements) LODR Regulations. The guidance note will be uploaded on the Exchanges’ websites and an email will be sent to all the companies which are under CIRP informing them about the guidance note.

Manner of public notice by the Exchanges, of the fact that Companies are under CIRP:

As soon as the Company gets admitted into CIRP, the Exchange shall identify and tag the security in a manner, which will be easy for the members and market participants to know that the security is currently into IBC proceedings, though the list of securities will still be available on the Exchange website. The Exchanges will continue to provide an alert at the time of order entry informing the market participants that the scrip is undergoing CIRP. Further, trading members have been advised to incorporate this alert promptly in their front-end system.

The Exchanges will monitor on a regular basis the compliance of all companies under CIRP from a disclosure perspective, and any non-compliances observed will be reported to capital markets regulator, SEBI for further action.

It is also clarified that if a corporate person during any of the aforesaid processes under the Code suffers any loss, including penalty, if any, on account of non-compliance of any provision of the applicable laws, such loss shall not form part of insolvency resolution process cost or liquidation process cost under the Code. It is also clarified that the Insolvency Professional will be responsible for the non-compliance of the provisions of the applicable laws if it is on account of his conduct.

(This article represents the views of the authors only and does not intent to give any kind of legal opinion on any matter, the readers are free to consult the authors in order to solicit any legal advise or opinion)

Authors – CS Vino.Vasu.Bhar
(can be reached at csv2jb@gmail.com)

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