Data archives' minimum net worth must be Rs 50 crore

The insolvency regulator has laid down the condition that an information utility (IU) must have a minimum net worth of Rs 50 crore and cannot have more than 49 per cent as foreign direct investment (FDI).

An IU keeps all records — such as the assets and liabilities — of a company going insolvent.

The Insolvency and Bankruptcy Board of India has come up with the final rules for setting up IUs.

The net worth threshold is slightly lower than the one recommended by a working group at the draft stage. The group had recommended a threshold of Rs 60 crore. However, it had recommended the same FDI cap.

Experts say this is to ensure that the control remains in the hands of the Indian counterpart, given the extent to which sensitive information about Indian companies will be stored in these systems.

Accepting the working group’s recommendations, the regulator has said each entry in an IU will have a separate identification because multiple identification numbers can give rise to frauds.  

However, the final rules do not mention what the unique identification number for this purpose could be. In the draft, it was mentioned that the permanent account number (PAN) could not be accepted. The rules allow different parties in the same case to register with different information utility firms.

The information utility is also responsible for authenticating the information of default once it is registered with the IU. It did not go into the details of this authentication process. 

Aiming at providing authentic information in the database, the working group had recommended that the debtor and creditor must authenticate the information. However, where the debtor challenges the information provided by the creditor, the information should still be taken as authenticated if the creditor and the financial institution concerned authenticate it. 

The working group said it should be mandatory for financial creditors to submit the data on debt, while operational creditors (those who provide service to assist operations of the company concerned) need not make any disclosures on the operational debt.