RBI allows ARCs to act as resolution applicants under IBC
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- Last Updated on 14 October, 2022
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CIRCULAR No. RBI/2022-23/128 DOR.SIG.FIN.REC.75/26.03.001/2022-23, Dated: 12.10.2022
The RBI has allowed asset reconstruction companies (ARCs) to act as resolution applicants under the IBC, which are not specifically allowed under SARFAESI. Up till now, ARCs were not permitted to commence or carry on any business other than that of securitisation or asset reconstruction or any business referred in the SARFAESI Act. Now, ARCs can undertake those activities as a Resolution Applicant (RA) under IBC which are not specifically allowed under the SARFAESI Act. This permission shall be subject to the following conditions:
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- Minimum NOF of Rs 1000 crore.
- A committee comprising of a majority of independent directors shall be constituted to take decisions on the proposals of submission of resolution plan under IBC.
- The ARC shall explore the possibility of preparing a panel of sector-specific management firms/ individuals.
- In respect of a specific corporate insolvency resolution process (CIRP), the ARCs shall not retain any significant influence or control over the corporate debtor after five years from the date of approval of the resolution plan.
- The ARC shall make additional disclosures in the financial statements with respect to assets acquired under IBC in addition to the existing disclosure requirements.
- The ARC shall disclose the implementation status of the resolution plans approved by the Adjudicating Authority on a quarterly basis in financials.
In order to strengthen transparency in the ARC sector and to improve the corporate governance standards in ARCs, RBI has introduced various such as maximum tenure of MD/CEO/WTDs has been restricted to 15 years after which 3 years cooling off period is required, at least half of the directors attending the meetings of the Board shall be independent directors, Maximum age cap for position of MD/CEO/WTDs shall be 70 years, etc.
Click Here To Read The Full Circular
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