IBBI Rules Seek to Keep Completed Projects Out of Resolution Process, Pg17

Key Highlights:

• The Insolvency and Bankruptcy Board of India (IBBI) has mandated project-wise completion status for real estate companies undergoing insolvency.
• The Committee of Creditors (CoC) can recommend excluding specific real estate projects from the Corporate Insolvency Resolution Process (CIRP) with at least a 66% voting share.
• This aims to prevent disruption to completed and occupied projects when a developer faces insolvency.
• Resolution professionals must conduct a project-wise technical and cost-to-complete assessment before inviting expressions of interest.

Detailed Insights:

• The new regulations by IBBI address concerns of homebuyers and aim for project-specific resolution in real estate insolvencies.
• This approach minimizes the impact on viable projects, allowing resolution efforts to focus on those genuinely requiring intervention.
• Under the Insolvency and Bankruptcy Code (IBC), 2016, homebuyers are recognized as financial creditors, enabling them to initiate insolvency proceedings.
• Previously, the insolvency of a holding company often affected all its real estate projects, including those nearing completion, particularly observed in regions like Delhi-NCR.
• The project assessment by the resolution professional includes physical construction status, regulatory approvals, inventory, estimated costs, funding needs, timelines, and risks.
• This comprehensive assessment forms part of the Information Memorandum provided to prospective resolution applicants.

Key Concepts Involved:

• Insolvency and Bankruptcy Board of India (IBBI): A regulatory body overseeing insolvency proceedings and professionals in India.
• Corporate Insolvency Resolution Process (CIRP): A legal process under the IBC for resolving insolvency of corporate debtors.
• Committee of Creditors (CoC): A body comprising financial creditors that makes key decisions during the CIRP.
• Insolvency and Bankruptcy Code (IBC): A comprehensive law enacted in 2016 to consolidate and amend laws relating to reorganization and insolvency resolution.