IBBI Proposes Reforms for Real Estate Insolvency to Enhance Stakeholder Protection
The Insolvency and Bankruptcy Board of India (IBBI) has proposed reforms aimed at streamlining the insolvency process for real estate companies and providing better protection for stakeholders. These proposals include key changes such as the inclusion of
IbbiReal Estate InsolvencyStakeholder ProtectionCocIbcReal EstateNov 07, 2024
One of the major proposals is the inclusion of land authorities in Committee of Creditors (CoC) meetings as invitees, although without voting rights. In corporate insolvency resolution processes (CIRP) involving real estate companies, land authorities play a crucial role, yet they currently lack mandatory representation in the CoC. The IBBI suggests that their inclusion will enhance regulatory compliance and improve the feasibility of resolution plans.
The paper also addresses issues related to cancelled land allotments in insolvency cases. It proposes that resolution professionals should report such cancellations to the CoC, allowing stakeholders to make informed decisions on whether to pursue liquidation or continue with the resolution process. This measure aims to ensure that all stakeholders are aware of the project's status and can make informed decisions.
To facilitate creditor representation, the IBBI recommends allowing multiple facilitators in cases with large numbers of creditors. This will improve communication and representation, ensuring that all creditors' voices are heard and considered during the insolvency process.
Enhancing transparency is another key focus of the reforms. The IBBI has proposed that the meeting minutes of CoC for real estate projects be made accessible to all creditors through a secure online system. This will help counter rumours and misinformation and ensure that all stakeholders have access to accurate information.
Additionally, the board proposes changes to streamline the possession handover process for real estate projects. Resolution professionals will be able to transfer ownership to homebuyers who have fulfilled their financial obligations, subject to CoC approval. This will provide clarity and security for homebuyers, ensuring that their rights are protected during the insolvency process.
The IBBI has invited stakeholders to provide comments on these proposals by November 27. After considering the feedback, the board plans to make rules under the provisions of section 196 of the code. These reforms are expected to bring significant improvements to the real estate insolvency process, providing better protection and transparency for all stakeholders involved.
Frequently Asked Questions
What is the main objective of the IBBI's proposed reforms for real estate insolvency?
The main objective of the IBBI's proposed reforms is to streamline the insolvency process for real estate companies and enhance protection for stakeholders. This includes improving regulatory compliance, enhancing transparency, and ensuring better representation of creditors.
What role do land authorities play in the insolvency process for real estate companies?
Land authorities play a crucial role in real estate projects by ensuring regulatory compliance. However, they currently lack mandatory representation in the Committee of Creditors (CoC) meetings, which the IBBI proposes to change by including them as invitees.
How will the inclusion of land authorities in CoC meetings benefit the insolvency process?
The inclusion of land authorities in CoC meetings will enhance regulatory compliance and clarify the status of real estate projects. This will ultimately improve the feasibility and success of resolution plans.
What measures are proposed to improve transparency in the insolvency process for real estate projects?
The IBBI proposes to make the meeting minutes of the Committee of Creditors (CoC) for real estate projects accessible to all creditors through a secure online system. This will ensure that all stakeholders have access to accurate and up-to-date information.
How will the proposed changes affect the possession handover process for homebuyers?
The proposed changes will streamline the possession handover process by allowing resolution professionals to transfer ownership to homebuyers who have fulfilled their financial obligations, subject to CoC approval. This will provide clarity and security for homebuyers during the insolvency process.
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