RP: Disclosure of Information Relating to C/F of Loss in IM

RP required to Disclosure of Information Relating to Carry Forward of Losses in Information Memorandum 

IPs shall include a dedicated section in the Information Memorandum, explicitly detailing the carryforward of losses under the Income Tax Act, 1961. IBBI had earlier amended Regulation 36 of the IBC (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 (“CIRP Regulations”) to mandate the disclosure of carry forward of losses as per the Income Tax Act, 1961 in the IM. This enhanced disclosure requirement aims to provide potential resolution applicants with a clearer and more comprehensive picture of the corporate debtor’s financial and tax position, thereby enabling them to develop more informed and feasible resolution plans, including any potential benefits under the tax laws. This direction is issued under the powers conferred upon the Board under Section 196 of the IBC 2016. In addition, IPs were advised to ensure a comprehensive and accurate capture of such details in the IM.

Upon review of recent Information Memoranda, the Board has observed that the disclosure of carryforward losses by insolvency professionals is often inadequate or inconsistent. To address this, a more robust and uniform approach is required.

IBBI Direction: Accordingly, all IP’s are hereby directed to include a dedicated section in the IM that explicitly details the carryforward of losses under the Income Tax Act, 1961.

Quantum of Carryforward Losses Available under IBC :

Total amount of carryforward losses available to the corporate debtor. This section shall prominently highlight, but not be limited to, the following aspects:

a) The quantum of carryforward losses available to the corporate debtor;
b) A breakdown of these losses under specific heads as defined in the Income Tax Act, 1961, including but not limited to:
Business Loss (Section 72)
• Unabsorbed Depreciation (Section 32(2))
• Speculative Business Loss (Section 73)
• Capital Losses (Section 74)
c) The applicable time limits for carryforward forward and set-off of each category of losses;
d) In cases where no carryforward losses are available, the IM must explicitly state that no such losses exist under the Income Tax Act, 1961.

Time Limits for Utilization : Statutory time limits for carry forward and set-off of each category of loss.

Declaration if No Losses Exist : If no carry forward losses are available, the IM must explicitly state this fact

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