Revamping IBBI Forms Aim To Streamline Compliance, But Effective Data Utilisation Challenge Remains: Experts
The major reforms include merging, eliminating and splitting of various CIRP Forms
The Insolvency and Bankruptcy Board of India (IBBI) has released discussion paper on ‘Reducing compliance by review of CIRP Forms submitted by Insolvency Professionals to IBBI’ in an aftermath of advice provided by the Financial Stability and Development Council (FSDC), to remove redundancy in compliance requirements for Insolvency Professionals (IPs) and Insolvency Professional Agencies (IPAs).
The major reforms in the discussion paper includes elimination of IP-1 and CIPR-6 form. Merging of CIRP-1 and CIRP-2 which is to be filled after the constitution of the Committee of Creditors (CoC).
Similarly, Form CIRP-5 will be split into Form CP-3A pertaining to the details of the application filed with the Adjudicating Authority (AA) for resolution plan approval, liquidation or closure and CP-3B which will be having the details of the AA's order.
Mukesh Chand, Senior Counsel at Economic Laws Practice (ELP) said, “The primary reason for these changes is to address the overburdened compliance requirements that have accumulated over the past seven years, which have resulted in duplication of information and inefficiencies. By eliminating redundant forms and streamlining the reporting process, IBBI aims to enhance the overall efficiency of the insolvency resolution process, reduce administrative costs, and ensure better utilisation of resources by IPs and IPAs.”
Additionally, the discussion papers also propose a monthly compliance reporting framework that would mandate IPs to file the status and progress of CIRP on the last day of every month, instead of different dates prescribed for different forms as of now.
“The proposed amendments will reduce the cumbersome reporting requirements for the IPs during the process. It will also rationalise the reporting requirements and negate duplication in information dissemination,” said Subodh Dandawate, Associate Director - Regulatory Services at Nexdigm.
Dandwate also added that the proposed reporting will give focused data inputs to the regulator that may help evaluate overall efficacy of the regulations.
Durgesh Khanapurkar, Partner at Desai & Diwanji stated that the objectives that IBBI aims to achieve through the proposed reforms are three-fold viz: (i) reduction in the amount of information or data that IPs are required to submit with the objective of eliminating duplication; (ii) realignment of compliance deadlines to a specified time window to enable IPs to use their resources more effectively; and (iii) simplifying the compliance process by combining various reporting systems, thereby avoiding duplication.
“In a way, the first and third objectives are overlapping as both seek to eliminate duplication,” Khanapurkar from Desai & Diwanji stated.
Chand from ELP also mentioned that there is no denial of the fact that at present IPs are overburdened with a multitude of compliance requirements, including the submission of periodical progress reports to IBBI and national company law tribunals (NCLTs), while managing the CIRP and liquidation processes.
“Therefore, there is a pressing need to shift to an automated data and information management system. While the consolidation and revamping of forms are steps in the right direction, the real issue lies in how this massive data is being utilised to bring about changes and identify the root causes of delays in the CIRP and liquidation processes,” Chand added.
