Reserve Bank of India has issued a notification reviewing the existing framework of the Asset Reconstruction Company which will help to strengthen transparency and to improve the corporate governance standards. One such major change is allowing the ARC to act as the Resolution Applicant under the Insolvency and Bankruptcy Code 2016.
A. Asset Reconstruction Company can undertake those activities as a Resolution Applicant under IBC which are not allowed under the SARFAESI Act subject to following conditions:
1.It shall have a minimum Net owned Fund (NOF) of Rs.1000 Crore.
2.To undertake the Role of RA it shall have a board approved policy which will include the the scope of activities, internal limit for sectoral exposures, etc.
3.Committee with the majority of Independent Director shall be constituted to decide upon the proposal of submission of plan under IBC
4.It shall explore the possibility of having a sector specific panel of management firms/individuals having expertise in running the firms/companies and which can be considered for managing the firm/companies, if needed.
5.In specific CIRP ARC shall not retain any significant influence or control over the corporate debtor after 5 years from the date of approval of plan by the adjudicating authority.
6.It shall not be allowed to submit a fresh plan either as the RA or as a Co-applicant if it fails to comply with the above conditions
7.In addition to the existing disclosure in the financial statements it shall make additional disclosure about the assets (type and value) acquired under IBC, the sector-wise distribution based on business of the corporate debtor.
8.Implementation status of the approved Resolution plan to be disclosed quarterly in the financial statements.
Notification:
