New IBC rule stricter on personal guarantors

The Insolvency and Bankruptcy Board of India (IBBI) has made it mandatory for resolution professionals (RPs) to inform the national company law tribunal (NCLT), if a personal guarantor fails to submit a repayment plan.

The new rule will effectively increase the accountability of personal guarantors, make it difficult for them to escape culpability. 

“Where no repayment plan has been prepared by the debtor under section 105 of the (Insolvency and Bankruptcy) Code, the resolution professional shall file an application, with the approval of creditors, before the adjudicating authority intimating the non-submission of a repayment plan and seek appropriate directions,” the IBBI said in new notification.

Experts said that the addition of this rule — regulation 17B — is a significant and will help address a critical lacuna by prescribing a definitive course of action for RPs in regard to personal guarantors. “The amendment ensures procedural continuity and mitigates the risk of undue delay or procedural stasis,” said Amit Agarwal, partner at Nangia & Co LLP.

Publication – Financial Express

By Amit Agarwal