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Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) (Amendment) Regulations, 2018

On 6th February, 2018, the Insolvency and Bankruptcy Board of India (IBBI) amended the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 vide notification no. IBBI/2017-18/GN/REG024. The amendment provides that there shall be in addition to the extent liquidation value, a fair value. The resolution professional shall appoint two registered valuers to determine the fair value and the liquidation value of the corporate debtor.

According to the recent amendment, “fair value” means the estimated realizable value of the assets of the corporate debtor, if they were to be exchanged on the insolvency commencement date between a willing buyer and a willing seller in an arm’s length transaction, after proper marketing and where the parties had acted knowledgeably, prudently and without compulsion. And “liquidation value” means the estimated realizable value of the assets of the corporate debtor, if the corporate debtor were to be liquidated on the insolvency commencement date.

In the principal regulations, for regulation 27, the following regulation has been substituted, namely; a provision for appointment of registered valuers which provides that the resolution professional shall within seven days of his appointment, appoint two registered valuers to determine the fair value and the liquidation value of the corporate debtor in accordance with regulation 35:

Provided that the following persons shall not be appointed as registered valuers, namely:

(a) a relative of the resolution professional;
(b) a related party of the corporate debtor;

Further, provisions for the valuation of fair value and liquidation value has also been provided herein. Firstly, the two registered valuers appointed under regulation 27 shall submit to the resolution professional an estimate of the fair value and of the liquidation value computed in accordance with internationally accepted valuation standards, after physical verification of the inventory and fixed assets of the corporate debtor; Secondly, if in the opinion of the resolution professional, the two estimates of a value are significantly different, he may appoint another registered valuer who shall submit an estimate of the value computed in the same manner; and Thirdly, the average of the two closest estimates of a value shall be considered the fair value or the liquidation value, as the case may be. The resolution professional and registered valuers shall maintain confidentiality of the fair value and the liquidation value.

The second feature introduced by the amendment is Evaluation Matrix. The “evaluation matrix” means such parameters to be applied and the manner of applying such parameters, as approved by the committee, for consideration of resolution plans for its approval. The resolution professional shall issue an invitation , including evaluation matrix, to the prospective resolution applicants in accordance with clause (h) of sub-section (2) of section 25, to submit resolution plans at least thirty days before the last date of submission of resolution plans. The resolution professional may modify the invitation, the evaluation matrix or both with the approval of the committee within the timelines given under sub-regulation (1) or sub-regulation (2).

India’s Double Taxation Avoidance Treaty with Iran

India and Iran have signed an agreement for Avoidance of Double Taxation and Prevention of Fiscal Evasion with regard to taxes on income New Delhi, on 17th February 2018. Double Taxation Avoidance Agreement (DTAA) also referred as Tax Treaty is a bilateral economic agreement between two nations that aims to avoid or eliminate double taxation of the same income in two countries. As of now, India has DTAA with 84 nations, including Armenia, Bangladesh, Finland, Ireland, Japan, Kazakhstan, Greece, Italy and several others. Further, India is constantly gearing to establish DTAA with other nations as such agreements work towards promoting trade and investments among contracted nations.

The present agreement with Iran is on similar lines as entered into by India with other countries, it will stimulate flow of investment, technology and personnel from India to Iran and vice-versa, and will prevent double taxation.

The agreement also meets treaty related minimum standards under G-20 OECD Base Erosion and Profit Shifting (BEPS) Project, in which India participated on an equal footing. The Organisation of Economic Corporation and Development’s Base Erosion and Profit Shifting (BEPS) Project (BEPS) refers to tax planning strategies that exploit gaps and mismatches in tax rules to artificially shift profits to low or no-tax locations where there is little or no economic activity. Although some of the schemes used are illegal, most are not. This undermines the fairness and integrity of tax systems because businesses that operate across borders can use BEPS to gain a competitive advantage over enterprises that operate at a domestic level. Moreover, when taxpayers see multinational corporations legally avoiding income tax, it undermines voluntary compliance by all taxpayers.

The pact provides for exchange of information between the two nations in line with the latest international standards which will improve transparency in tax matters and will help curb tax evasion and tax avoidance.

22 February 2018
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