Suggestions / Comments on Drafts
The Insolvency and Bankruptcy Board of India (Information Utilities) Regulations, 2016
- Regulation 3(2)(a):
- “Constitutional Documents” may be defined referring to Section 5(4) of Insolvency and Bankruptcy Code, 2016 (IBC).
- It refers to Sec.213 of IBC for activities. In fact Sec.213 does not list the activities, it in turn refers to specified services (assuming specified in MoA) including core services.
- Suggest Regulation 3(2)(a) may be as follows – “It shall have constitutional documents that mention the activities including the core services as defined under section 3(9) of IBC, as its main objects.”
- Regulation 3(2)(b):
- Minimum paid-up capital of “Sixty Crore”-looks very high, also need to understand business models of these companies and return on investment (ROI) this investment can generate.
- Regulation 3(2)(e): an IU cannot be a subsidiary to any bodycorporate even in single layer – reg 3(2)(c) restricts the holding of any person to be not more than 15%.
- Regulation 3(2)(f): “Key Managerial Personnel” may be defined.
- Regulation 3(2)(g): “substantial Interest” may be defined.
- In Regulation 4 – there should be a clause on penal action for wrong or misleading information in the Application – disciplinary action or fine or both. Though it refers to Section 220 of IBC, which the provision of penalty for contravention by IU, but not the Company which applied for certificate (which is not IU still)
- Regulation 6(1)(c): “Persons in control” has to be clearly defined – when can we say the person is in control?
- Regulation 6(1)(e)(3): “….satisfy obligations under section 214 of the Code”. To satisfy that, there should be clear regulations with reference to 214 (b),(d),(f) and (g) of IBC.Certain Regulations such as quality standards are yet to come. Hence, instead of referring only 214 code, it should also refer to appropriate regulations which mention the requirements of 214 (b),(d),(f) and (g). Ex: It may refer to Regulation 12(4) – publishing of standards by Board in its website.
- Regulation 7: at various places “reasonable time” is used – there should be limit on time period or person responsible for confirming reasonable time.
- The words “Information Utility” is used at various places. It may be clearly defined as the Company which has obtained Certificate of Transitional Registration or Certificate of Registration under regulations 5 and 7.
- Regulation 7(2)(e): ”no change in control….” – when can we say there is change in control? If there is a change in the Board of Directors – does the IU require prior approval of the Board?Reg. 3(2) restricts the holdings of persons in IU to be not more than 15% – it rules out the possibility of control by holding more than 50% shares. Change in control – is to be defined clearly – either the change KMP or if its change in members – percentage of such change to term it has change in control.
- Regulation 23(3): “………same person…..” It might not be always possible to obtain authentication from the same person who did last.
- Regulation 34(3): “Law” should be replaced by “Lay”
- Regulation 35(2): There should be inspection without notice to avoid the possibility of manipulation. Prior intimation leads to adjustments and changes, which would not serve the intention of inspection. Intervals should be enough, but not prior notices.
- The year in the name of Regulations should be 2017 or such other year of notification – it would be more appropriate to link any regulations/rules to the year in which it is notified, than the year of framing the draft.
- The interval of reporting to Board by IU on Audit, Grievance Redressal and Compliance Status should be specified clearly – Annually or Half yearly.
- There should be a clause that IUs shall collect the information from depositories or other agencies like RoC, Stock Exchanges, CIBIL, CRISIL, RBI, etc., which collect the similar information and is mandatory as per the respective applicable Laws. The duplication of compliance should be avoided to the extent possible. Idea is can we get the data from existing agencies instead of duplicating with multiple agencies, may be difficult for the corporates to comply.
- There should be clarity on requirement of Rs.60 Crore paid up capital. Can existing companies i.e. rating agencies, CIBIL, NSDL take up this registration?
- Reporting format and time period by IU to the Board should be very clear.
CS G. Raghu Babu | IBBI/IPA-02/2016-17/34/2016020171048
CS Sandhya Tadla
R & A Associates