November 17, 2020
Summary of the circular and notifications issued by SEBI and IBBI on 13/11/2020
I. SEBI issues Standard Operating Procedure with respect to imposition of fine and initiation of action in case of non-compliance of continuous disclosures by issuers of listed Non-Convertible Debt Securities(NCDS) and/or Non-Convertible Redeemable Preference Shares(NCRPS) and/or Commercial Papers(CP)
To align the SOP for imposition of fine and initiation of action in case of non-compliance of continuous disclosures by issuers of NCDS, NCPRS, and CPs with that of the listed securities, SEBI has laid down the fine to be levied by the Stock Exchange for violation of various regulations as listed in the Circular.
Further, Stock Exchanges in which the said securities are listed, in case of violation of any prescribed regulation, shall send notice within 30 days from the due date and the fine shall be paid by the Entity within 15 days from the receipt of such notice, failing which the fine shall be paid within 10 days of the reminder notice. On failure to pay the fine even after the reminder, the entity shall be barred from issuance of any securities and further listing of the said securities, till such time the remits the fine.
The Stock Exchange shall disclose on their website the action(s) taken against the entities for non-compliance(s); including the details of the respective requirement, amount of fine levied/ action taken etc.
The circular shall come into effect for compliance period ending on or after December 31, 2020.
II. IBBI amends various regulations as follows:
a. IBBI (Liquidation Process) Regulations, 2016
Through this amendment-
1. a creditor can now assign or transfer the debt due to him or it to any other person during the liquidation process, and provide to the liquidator the terms of such assignment or transfer and the identity of the assignee or transferee and the liquidator shall accordingly update the list of stakeholders.
2. a liquidator may assign or transfer a not readily realisable asset through a transparent process, in consultation with the stakeholders’ consultation committee in accordance with regulation 31A, for a consideration to any person, who is eligible to submit a resolution plan for insolvency resolution of the corporate debtor.
b. IBBI (Information Utilities) Regulations, 2017
Through this amendment, an information utility shall disseminate every public announcement it receives or has access to, on the date of its receipt or access, as the case may be, to its registered users, who are creditors of the corporate debtor undergoing insolvency proceeding under the Code.
c. IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016
Key amendments under this notification are as follows:
1. to initiate a CIRP, the financial creditor shall submit a record/evidence of default, which could be-
a. certified copy of entries in the relevant account in the bankers’ book as defined in clause (3) of section 2 of the Bankers’ Books Evidence Act, 1891 (18 of 1891);
b. an order of a court or tribunal that has adjudicated upon the non-payment of a debt, where the period of appeal against such order has expired.
2. The list of creditors, post verification of their claims, shall be submitted to the Board by the IRP or RP, and the Board shall publish the same on its website.
3. RP shall intimate each claimant on the schedule of payment of debts as approved by the Adjudicating Authority as part of the resolution plan, within 15 days of the approval order.
III. IBBI notifies list of mistakes committed by Resolution Professionals in order to sensitise them about these avoidable mistakes
Here are few mistakes committed by IPs, which have been listed out by the IBBI to enable resolution professionals from committing the same in the future, thereby pre-empting the IBBI/IPA to initiate any disciplinary action.
a. Assignment without having Authorisation, where IPs undertook CIRP without having an authorisation for assignment (AFA) and in some cases, without even applying for an AFA, in contravention of the provisions of law.
b. The fee payable to an IP was not fixed beforehand, as required by the law and the IP drew a fee on his own without approval of such fee from the competent authority.
c. IRP did not make public announcement promptly on his appointment, or made it later, or made it in one newspaper, or made it in one English newspaper having circulation at the location of the Corporate Debtor.
The details of other commonly committed mistakes are detailed in the notification.
These amendments are integrated in our free to use website www.ca2013.com for your easy reference.