Earning My Keep

As most readers of this blog already know, I have been in India since early January as a Fulbright-Nehru Research Scholar. (Backstory and some posts of interest here, here, here, and here.) The topic for my grant was broad: To research the implementation of the Insolvency and Bankruptcy Code, 2016. With help from my National Law University, Delhi colleague Risham Garg and interviews with insolvency professionals, we refined the scope of the project, created and circulated a questionnaire, analyzed the responses, conducted further interviews, presented an early working draft of a paper, and now, at long last, have published a working draft of our paper. You can download it by going here.

Quoting from the abstract:

Pryor and Garg have undertaken a multi-pronged project to understand certain aspects of the implementation of India’s new Insolvency and Bankruptcy Code, 2016 (“IBC”). Their efforts have included a questionnaire as well as interviews of resolution  professionals, other insolvency professionals, representatives of several of the Insolvency Professional Agencies, and officials of the Insolvency and Bankruptcy Board of India.

Pryor and Garg have identified several problematic developments as a result of their research that in turn have led them to three preliminary conclusions:

1. Vesting near-plenary control of the Corporate Resolution Insolvency Process (CIRP) with a Committee of Creditors composed of only financial creditors leads to a perception of inequitable distributions between the class of financial creditors and the class of operational creditors.

2. The CIRP provisions of the IBC may be inconsistent with public policy because they have been construed in a way that fails to protect vested charges that secured creditors may have against the property or assets of the corporate debtor.

3. The CIRP provisions and accompanying regulations fall short of the standards of procedural fairness.

In addition to conducting additional empirical research to test their preliminary conclusions, Pryor and Garg suggest that the CIRP Regulations be revised to provide that: (i) the any resolution plan provide for payment the value of the secured claims of holders of registered charges in assets of the corporate debtor; (ii) any resolution plan disclose the bases for the allocation of value within the class of financial creditors and between the classes of financial and operational creditors; and (iii) the Committee of Creditors provide reasons for any deviation from the norm of equitable distribution of any residual enterprise value among financial and operational creditors.

I hope that releasing this draft will generate helpful comments, necessary corrections, and thoughtful critiques. If the IBC interests you, please read the paper, and share the link to it with like-minded folks.