Insolvency and Bankruptcy Board of India to decide fate of guarantors

Insolvency and Bankruptcy Board of India to decide fate of guarantors
14/12/2017 , by , in News/Views

The wait for framing final regulations to punish high profile individuals, including promoters, who have given personal guarantees for corporate loan defaulters may soon be over as the regulator is set to make a call on the matter next week. The governing body of Insolvency and Bankruptcy Board of India (IBBI) is expected to finalise broad contours for dealing with personal guarantors of defaulting entities — seen as an additional tool to punish truant promoters — at a meeting on Dec 19.

A working committee of insolvency professionals had submitted its recommendations on proposed regulations to IBBI more than a month ago.

“The draft regulations, along with public comments and recommendations of the advisory committee, are under consideration of the governing board of IBBI,” said MS Sahoo, chairman of the board. “A working group set up by IBBI has drafted rules and regulations for operationalising insolvency regime for individuals, including guarantors to corporate,” he said.

As per the proposal, personal guarantors who may have escaped legal action in the insolvency process will now be dragged into individual insolvency proceedings by creditors in the dedicated bankruptcy court National Company Law Tribunal (NCLT). The eight-member governing body of IBBI had discussed the recommendations in a meeting on December 1.

“The governing body could not discuss it in its entirety due to time constraint,” said a person with the direct knowledge of the matter. “A whole lot of subjects were discussed as the IBC is at an evolving stage,” the person said. The working committee of insolvency professionals, too, had met IBBI last week, the person said. The committee is now engaged in drafting the bankruptcy part, which will become essential if a resolution plan fails and the corporate guarantor is supposed to be declared ‘bankrupt’, an industry insider said.

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