Insolvency and Bankruptcy Board of India (Information Utilities) Regulations, 2017

The  Insolvency and Bankruptcy Board of India (“IBBI”) vide its notification dated 31 March 2017 has issued the Insolvency and Bankruptcy Board of India (Information Utilities) Regulations, 2017 (“Information Utilities Regulation”) and it shall come into force on 1 April 2017. These regulations have been made to provide a framework for registration and regulation of information utilities. Information utility (“IU”) is established to collect, collate, authenticate and disseminate financial information of companies.

The key highlights of the regulation are listed below:-

•    Only public companies which satisfy conditions as specified in Regulation 3 of Information Utilities Regulation are eligible to be registered as an information utility;

•    A person eligible for registration as an IU may make an application to the IBBI in Form A of the Schedule, along with a non-refundable application fee of INR 500,000;

•    An IU seeking renewal of registration shall, at least six months before the expiry of its registration, make an application for renewal in Form A of the Schedule, along with a non-refundable application fee of INR 500,000;

•    The IBBI may grant or renew a certificate of registration to the applicant as an information utility in Form B of the Schedule, within 60 days of receipt of the application, excluding the time given by the Board for removing the deficiencies, or presenting additional documents or clarifications, or appearing in person, as the case may be;

•    The certificate of registration shall be valid for a period of 5 years from the date of issue;

•    Restrictions have been imposed on holding or acquiring more than 10% of the paid-up equity share capital or total voting power of an information utility;

•    More than half of the directors of an information utility shall be independent directors at the time of their appointment, and at all times during their tenure as directors;

•    IU shall have regulatory committee, compliance officer and Bye-laws as specified in the regulation;

•    IU shall provide the core services and other services to the users;

•    User shall register with an IU for submitting information or accessing information stored with;

•    General duties of IU and its users are prescribed in the regulation
Key provisions specified in the Insolvency and Bankruptcy Code (“IBC”) in relation to IU:

•    As per IBC, a financial creditor is mandated to submit financial information with the IU, however, non-filing the same does not attract penalty. If a financial creditor proposes to make an application for initiating corporate insolvency resolution process, he may submit the application along with the record of default recorded with the IU or such other evidence. The adjudicating shall ascertain the existence of a default from the records of an information utility or on the basis of other evidence furnished by the financial creditor. Hence, filing of information with the IU would be of help to the financial creditor while initiating the corporate insolvency process against debtor;

•    Submitting financial information is not mandatory for operational creditors. However, any information submitted will help the operational creditors in substantiating their debts;

•    Liquidator has the authority to collect the information from IU while verifying the proof of claims received from the creditors and admit the same based on the information. Hence, this will be of help to the creditors to substantiate their debts;

•    If any debt for which an application has been filed by a creditor is registered with IU, the debtor shall not be entitled to dispute the validity of such debt;

To read the full text of the Regulation, please click on the below link: