Government mulls creating a new portal with more details on stressed assets

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The government is planning to come up with a new platform that would have more details on stressed assets, a senior  government official said on October 17.

"The idea is to get better valuation for these stressed assets by increasing transparency," the official told Moneycontrol.

The plan is to have a kind of e-marketplace on the lines of the government e-marketplace where interested investors can view assets available for insolvency and resolution and also submit bids for assets.

"Presently, bidders get details on stressed assets after after the resolution professional floats an expression of interest (usually after 45 days of admission of a case in the National Companies Law Tribunal). This marketplace will make these details available much faster," the official said.

The new process will make details — default amount, size of various assets, and timeline of various processes for resolution — of the stressed company available on the portal as soon as the NCLT admits an insolvency process, the official said.

Interested investors will have access to these details  and would be required to sign a non-disclosure agreement.

"From the investors side, they can then start their due diligence and choose assets accordingly for resolution plans," the official said.

The proposal is still in the planning stage and no decision hasn't yet been taken on whether this portal will be a part of the Insolvency and Bankruptcy Board of India's (IBBI's) website or whether it would be a separate web portal altogether, the official said.

Delay in resolution of stressed assets has been one of the pain points of the insolvency and bankruptcy code. According to data from the IBBI, 34 percent of the 1,292 cases in the bankruptcy courts till June 2019 have been delayed beyond 270 days, a 26 percent rise from a year ago and 31 percent in the quarter ended March.

The bankruptcy law has been facing challenges in timely resolution because of a lack of adequate information utilities. An information utility provides ample financial details and records of balance sheet and cash flow statement of companies.

A report submitted by a working group to the ministry of corporate affairs had pointed out the necessity of these information utilities to facilitate timely resolution by providing "high-quality and authenticated information" on debts and defaults.

In order to smoothen the resolution process, the government in July cleared amendments to the insolvency law that would put in place a 330-day deadline for corporate resolution process, including litigation and other judicial processes, as well as make resolution plan binding on all stakeholders.

The amendments also allow the committee of creditors (COC) to take the decision to liquidate the corporate debtor, any time after constitution of the committee and before preparation of information memorandum for the resolution. The COC would have powers to take into account the commercial considerations regarding distribution proposed in resolution plan.

The amendments aim at filling critical gaps in the corporate insolvency resolution framework while at the same time maximising value from the resolution process.