The Insolvency and Bankruptcy Board of India has sought relaxation from commodities and capital market regulator and the I-T department on some rules for the insolvent companies.
Sources have told Moneycontrol that the Bankruptcy Board (IBBI) has requested SEBI to give the companies an exemption in disclosure norms during the 180 days period when insolvency resolution professionals (IRP) take over the firm to turn it around.
“We feel that if professionals are trying to turn around the companies, it would be difficult for them to update exchanges about every information,” a senior official from Corporate Affairs Ministry told Moneycontrol.
“Since they have a very short duration of 180 days to turn around the company, it becomes very difficult for professionals to fulfill regulatory requirements.”
IBBI has also asked the regulator to consider not taking any penal action against these companies, but only against the promoters.
“For any violation of laws by companies under the management of professionals, an IRP can be penalised under SEBI Act. Therefore, providing protection to them will be a welcome move coming from SEBI,” said Sumit Agrawal, former SEBI official and Founder, Suvan Law Advisors, a law firm specialising in regulatory affairs.
IBBI has also asked the Central Board of Direct Taxes (CBDT) to give exemption to such companies in Minimum Alternative Tax (MAT) during the 180-days period, according to sources quoted above.
“We are ready to give every possible support to the professionals who are running insolvent companies. That is why we requested CBDT for exemption in tax,” the MCA official said.
The move could help IRPs focus on turning around the operations at an insolvent company.
“Though the framework within which an IRP operates is statutory by nature, protection clauses under Insolvency and Bankruptcy Code are not sufficient to take care of liabilities under other legislations,” Agrawal added.
The market regulator had earlier given relaxation in open offer to buyers of distressed companies. In its recent board meeting, it also agreed to not take any action against distressed companies.