Comments/Suggestions are invited on:

DRAFT MODEL INSOLVENCY RESOLUTION PLAN - IIIPI

A. Background

An Insolvency Resolution Plan for any CD is a unique combination of financial, legal, management
and technical features which would provide a reasonable assurance of sustainable viability over the
period of recovery from internal or external stresses.

The Insolvency and Bankruptcy Code, 2016, is unique in having integrated this approach as a time
bound exercise, focusing on all the stakeholders.

While it is not possible to standardise the factors that would lead to the preparation and execution
of a successful resolution plan, a simplified Draft template for the purpose of reference and
guidance is given below for comments/suggestions by IPs/RPs.

B. Legal Aspects for Compliance

Some of the key related areas of IBC and Regulations along with other legislations that imping on
this activity are detailed in the Annexure.

The Template given below, though designed keeping in mind the requirements under the related
legal framework, is only indicative in nature and the final insolvency plan submitted by an applicant
should ensure compliance with all applicable laws and regulations relevant to the activity being
addressed.

C. Simplified Template of an Insolvency Resolution Plan

Details of the Applicant

This should include any prior association with the CD, applicant’s Profile and Track record, etc.

Executive summary

Provide a summary of key elements in the recovery plan.

Material changes

List all material changes since the commencement of proceedings under IBC.

Description of legal and financial structures

Describe the organizational framework of the CD.

Describe the legal and financial structures of the CD.

Business Profile

You must include a summary identification of core business lines and critical functions.

Governance arrangements (Board/Management)

Describe the CD’s governance arrangements. You must include:

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 - How the resolution plan is integrated into the governance structure of the CD
- The strength of overall risk management framework and its effectiveness during the
Resolution period.

Resolution strategy/options

List and describe resolution options, including:

- Capital and liquidity actions required to maintain or restore the viability and financial
position of the CD.
- Arrangements and measures to conserve or restore the CD’s own funds, and
- An assessment of the expected timeframe for implementing recovery options

Note that when identifying resolution options for a CD, you should consider a range of severe
macroeconomic and financial stress scenarios relevant to the CD’s specific conditions.

Summarise the overall resolution capacity of the CD and the overall capability of the corporate to
restore its financial position following a significant deterioration. You may also include:

- The risks associated with recovery options

- An analysis of any material impediments to the effective and timely execution of the
recovery plan, and
- Whether and how material impediments could be overcome
- In case the CD has undergone previous loan work-outs or restructurings, please give details
with outcomes.

Implementation strategy

Describe preparatory measures the CD has taken, or plans to take, to implement the resolution plan.

Assessment of gaps in key human resources, technical requirements incl. Opex/Capex, Tax issues,
uninterrupted availability of critical resources, etc.

Detail the payment schedule for all the Stakeholders.

Indicate how the Cash Flow would be managed during the resolution period, including any
requirement of Interim Finance and likely costs, sources, terms, etc.

Aligning essential Business needs with the Resolution Plan objectives.

Additional material information

Include additional information where this information is material to the CD’s business.

Recovery indicators

List and explain the resolution plan indicators and the points which identify when the CD needs to
take appropriate actions in the plan.

Explain how recovery indicators are proposed to be monitored.

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 Annexure

Legal Aspects - Model Resolution Plan

D. Preparation of an Information Memorandum

IBC Sec. 29(1) The Resolution Professional shall prepare an information memorandum in such form
and manner containing such relevant information as may be specified by the Board for formulating a
resolution plan.

(2) The resolution professional shall provide to the resolution applicant access to all relevant
information in physical and electronic form, provided such resolution applicant undertakes— (a) to
comply with provisions of law for the time being in force relating to confidentiality and insider
trading; (b) to protect any intellectual property of the corporate debtor it may have access to; and
(c) not to share relevant information with third parties unless clauses (a) and (b) of this sub-section
are complied with.

Explanation.—For the purposes of this section, "relevant information" means the information
required by the resolution applicant to make the resolution plan for the corporate debtor, which shall
include the financial position of the corporate debtor, all information related to disputes by or
against the corporate debtor and any other matter pertaining to the corporate debtor as may be
specified

E. Submission of Resolution Plan

IBC Sec. 30. (1) A resolution applicant may submit a resolution plan to the resolution professional
prepared on the basis of the information memorandum.

(2) The resolution professional shall examine each resolution plan received by him to confirm that
each resolution plan— (a) provides for the payment of insolvency resolution process costs in a
manner specified by the Board in priority to the repayment of other debts of the corporate debtor;
(b) provides for the repayment of the debts of operational creditors in such manner as may be
specified by the Board which shall not be less than the amount to be paid to the operational
creditors in the event of a liquidation of the corporate debtor under section 53; (c) provides for the
management of the affairs of the Corporate debtor after approval of the resolution plan; (d) the
implementation and supervision of the resolution plan; (e) does not contravene any of the
provisions of the law for the time being in force; (f) conforms to such other requirements as may be
specified by the Board.

CARE: Sec (5) The resolution applicant may attend the meeting of the committee of creditors in which
the resolution plan of the applicant is considered:

Provided that the resolution applicant shall not have a right to vote at the meeting of the committee
of creditors unless such resolution applicant is also a financial creditor.

IR Regulation31 “Insolvency resolution process costs” under Section 5(13)(e) shall mean- (a)
amounts due to suppliers of essential goods and services under Regulation 32; (b) amounts due to a
person whose rights are prejudicially affected on account of the moratorium imposed under section
14(1)(d); (c) expenses incurred on or by the interim resolution professional to the extent ratified
under Regulation 33; (d) expenses incurred on or by the resolution professional fixed under

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Regulation 34; and (e) other costs directly relating to the corporate insolvency resolution process
and approved by the committee.

IR Regulation 33 (4) Costs of the interim resolution professional. The amount of expenses ratified
by the committee shall be treated as insolvency resolution process costs.

Explanation- For the purposes of this Regulation, “expenses” mean the fee to be paid to the interim
resolution professional and other expenses, including the cost of engaging professional advisors, to
be incurred by the interim resolution professional.

IR Regulation 34. Resolution professional costs. The committee shall fix the expenses to be incurred
on or by the resolution professional and the expenses shall constitute insolvency resolution process
costs.

Explanation- For the purposes of this Regulation, “expenses” mean the fee to be paid to the
resolution professional and other expenses, including the cost of engaging professional advisors, to
be incurred by the resolution professional.

F. Resolution Plan

IR Regulation 35(1) Liquidation value is the estimated realizable value of the assets of the corporate
debtor if the corporate debtor were to be liquidated on the insolvency commencement date.

(2) Liquidation value shall be determined in the following manner: (a) the two registered valuers
appointed under Regulation 27 shall submit to the interim resolution professional or the resolution
professional, as the case may be, an estimate of the liquidation value computed in accordance with
internationally accepted valuation standards, after physical verification of the inventory and fixed
assets of the corporate debtor; (b) if in the opinion of the interim resolution professional or the
resolution professional, as the case may be, the two estimates are significantly different, he may
appoint another registered valuer who shall submit an estimate computed in the same manner; and
(c) the average of the two closest estimates shall be considered the liquidation value.

(3) The resolution professional shall provide the liquidation value to the committee in electronic
form.

IR Regulation 36(1) Subject to sub-regulation (4), the interim resolution professional or the
resolution professional, as the case may be, shall submit an information memorandum in electronic
form to each member of the committee and any potential resolution applicant containing- (a) at
least the matters listed in paragraphs (a) to (i) of sub-regulation (2), before its first meeting; and (b)
matters listed in paragraphs (j) to (l) of sub-regulation (2), within fourteen days of the first meeting.

(2) The information memorandum shall contain the following details of the corporate debtor- (a)
assets and liabilities, as on the insolvency commencement date, classified into appropriate
categories for easy identification, with estimated values assigned to each category; (b) the latest
annual financial statements; (c) audited financial statements of the corporate debtor for the last two
financial years and provisional financial statements for the current financial year made up to a date
not earlier than fourteen days from the date of the application; (d) a list of creditors containing the
names of creditors, the amounts claimed by them, the amount of their claims admitted and the
security interest, if any, in respect of such claims; (e) particulars of a debt due from or to the
corporate debtor with respect to related parties; (f) details of guarantees that have been given in

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relation to the debts of the corporate debtor by other persons, specifying which of the guarantors is
a related party; (g) the names and addresses of the members or partners holding at least one per
cent stake in the corporate debtor along with the size of stake; (h) details of all material litigation
and an ongoing investigation or proceeding initiated by Government and statutory authorities; (i)
the number of workers and employees and liabilities of the corporate debtor towards them; (j) the
liquidation value; (k) the liquidation value due to operational creditors; and (l) other information,
which the resolution professional deems relevant to the committee.

(3) A member of the committee may request the resolution professional for further information of
the nature described in this Regulation and the resolution professional shall provide such
information to all members within reasonable time if such information has a bearing on the
resolution plan.

(4) The interim resolution professional or the resolution professional, as the case may be, shall share
the information memorandum after receiving an undertaking from a member of the committee or a
potential resolution applicant to the effect that such member or resolution applicant shall maintain
confidentiality of the information and shall not use such information to cause an undue gain or
undue loss to itself or any other person and comply with the requirements under section 29(2).

IR Regulation 37.(1) A resolution plan may provide for the measures required for implementing it,
including but not limited to the following- (a) transfer of all or part of the assets of the corporate
debtor to one or more persons; (b) sale of all or part of the assets whether subject to any security
interest or not; (c) the substantial acquisition of shares of the corporate debtor, or the merger or
consolidation of the corporate debtor with one or more persons; (d) satisfaction or modification of
any security interest; (e) curing or waiving of any breach of the terms of any debt due from the
corporate debtor; (f) reduction in the amount payable to the creditors; (g) extension of a maturity
date or a change in interest rate or other terms of a debt due from the corporate debtor; (h)
amendment of the constitutional documents of the corporate debtor; (i) issuance of securities of the
corporate debtor, for cash, property, securities, or in exchange for claims or interests, or other
appropriate purpose; and (j) obtaining necessary approvals from the Central and State Governments
and other authorities.

IR Regulation 38. Mandatory contents of the resolution plan. (1) A resolution plan shall identify
specific sources of funds that will be used to pay the - (a) insolvency resolution process costs and
provide that the insolvency resolution process costs will be paid in priority to any other creditor; (b)
liquidation value due to operational creditors and provide for such payment in priority to any
financial creditor which shall in any event be made before the expiry of thirty days after the approval
of a resolution plan by the Adjudicating Authority; and (c) liquidation value due to dissenting
financial creditors and provide that such payment is made before any recoveries are made by the
financial creditors who voted in favour of the resolution plan.

(2) A resolution plan shall provide: (a) the term of the plan and its implementation schedule; (b) the
management and control of the business of the corporate debtor during its term; and (c) adequate
means for supervising its implementation.

IR Regulation 39. Approval of resolution plan. (1) A resolution applicant shall endeavour to submit a
resolution plan prepared in accordance with the Code and these Regulations to the resolution
professional, thirty days before expiry of the maximum period permitted under section 12 for the
completion of the corporate insolvency resolution process.
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(2) The resolution professional shall present all resolution plans that meet the requirements of the
Code and these Regulations to the committee for its consideration.

(3) The committee may approve any resolution plan with such modifications as it deems fit.

ADDITIONAL POINTS FOR CONSIDERATION

1. As per Section 30(2)(e) of IBC, a Resolution Plan submitted by Resolution Applicant should
not be in contravention of any of the provisions of the law for the time being in force. The
Resolution Plan should not bypass or breach any provision of any other law. In case the
Resolution Plan drawn up by the Resolution Applicant envisages any relief or concessions
from any State/Central Government/Authority, it is restricted only to the extent the same is
permissible under the respective laws/statutes/policies.

2. Regulation 37 of the IBBI (IRP for CP) lays down that measure included in the resolution plan
will require necessary clearances or permission for such transfer of the asset and permission
will have to be obtained from the concerned department (e.g. Forest department, NGT, etc.)
In case the land / assets have been leased to the CD, then necessary permissions have to be
obtained from the lessor. In case of captive assets (Coal Mines or other concessions)
necessary approval of the concerned agencies will be required. If the transfer of assets has
stamp duty implications under the Stamps Act 1899, then any relief shall only be as provided
in that Act.

3. In case a resolution plan envisages substantial acquisition of shares, then the necessary
compliances with the SEBI Takeover Code norms and applicable SAST Regulation will have to
be complied with. Any additional equity to be issued either to existing shareholders on Right
basis or preferential allotment to any Strategic Investor etc. or any proposed capital
reduction has to be compliant with the relevant provisions of Companies Act. The above is in
contrast with the provisions as contained under SICA which empowered the BIFR to grant
exemption from complying with the SEBI Takeover norms and also the provisions of
Companies Act w.r.t. preferential allotment of shares or reduction of capital without
complying with the applicable provisions of the Companies Act 2013.

4. If the proposal envisages merger or consolidation, it has to be ensured that such merger
within the ambit of provisions of the Competition Act. In case the resolution plan envisages
any preferential allotment of shares to the creditors or proposed strategic investor, or
conversion of debt or obligation into long term instruments then the applicant has to ensure
compliance with the relevant provisions of Companies Act, 2013.
5. Regulation 38, covers the mandatory condition of the resolution plan. It stipulates that the
resolution plan shall identify the source of funds that will be used for the payment and order
/priority of such payment. A resolution plan should provide for insolvency resolution process
cost and should ensure that it should be paid in priority of other creditor. With respect to
the payment made to be made to the operational creditor, it should be ensured that
liquidation value due to operational creditors shall be made available and such payment
shall be made in priority to any financial creditor which shall in any event be made before
the expiry of thirty days after the approval of a resolution plan by the Adjudicating
Authority.
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6. With respect to the payment made to the dissenting financial creditors (Creditors who voted
against the resolution plan) regulation stipulates that Resolution plan should ensure that
liquidation value due to such creditors shall be provided and such payment is made before
any recoveries are made by the financial creditors who voted in favour of the resolution
plan.

7. Besides these source of fund and their priority, a resolution plan should also provide for
term of the plan and implementation schedule. It should also provide for the management
and control of the business of the corporate debtor.

8. There appears to be no automatic statutory consequence of a failure of the Resolution Plan.

However, Section 33(4) read with Section 33(5) provides that any contravention in the
provisions of the Resolution Plan can be brought to the notice of NCLT for the purpose of
seeking liquidation of the Corporate Debtor and if the NCLT (AA) determines that the
Corporate Debtor has contravened the provisions of the Resolution Plan, it shall pass a
liquidation order. Therefore, the above provision can be read to mean that in case of failure
or non-compliance of a Resolution Plan, the Corporate Debtor can face liquidation orders
under the provisions of the IBC.

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