Must list fraudulent trades in sale prospectus, says IBBI

Administrators of bankrupt businesses must mandatorily disclose all dubious transactions carried out by a firm's management while preparing its sale prospectus under the bankruptcy code, the Insolvency and Bankruptcy Board of India (IBBI) has said.

- Gireesh Chandra Prasad

IBBI's latest amendment to Insolvency Resolution Process for Corporate Persons states that corporate restructuring plans prepared by administrators appointed by creditors should only account for recovery from questionable deals and trades made by previous management that have been fully disclosed in the sale prospectus, known as the information memorandum.

The move aims to improve transparency in debt resolution processes and enable better price discovery. The regulations proposed enhanced disclosures in the prospectus to include details of all identified avoidance transactions or fraudulent and wrongful trading.