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Business News/ Politics / Policy/  Draft rules for bankruptcy code finalized in boost to ease of doing business in India
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Draft rules for bankruptcy code finalized in boost to ease of doing business in India

Under the rules, a company must have a minimum net worth of Rs10 crore and paid-up share capital of Rs5 crore to qualify for registration as an insolvency professional agency

The Insolvency and Bankruptcy Code, 2016, was passed by Parliament in May. Photo: MintPremium
The Insolvency and Bankruptcy Code, 2016, was passed by Parliament in May. Photo: Mint

New Delhi: The corporate affairs ministry on Monday evening issued final rules for registering and regulating insolvency professional agencies, which will be critical cogs in the introduction of India’s bankruptcy code.

The Insolvency and Bankruptcy Code, 2016, passed by Parliament in May, aims to improve the ease of doing business in India by facilitating smoother and time-bound settlement of insolvency and faster turnaround of businesses, apart from creating a database of serial defaulters.

Under the rules, a company must have a minimum net worth of Rs10 crore and paid-up share capital of Rs5 crore to qualify for registration as an insolvency professional agency (IPA). Control of the IPA should be with Indian residents. The regulations require minimum of seven directors on every IPA governing board.

It is the duty of IPAs to ensure compliance with the regulations and guidelines issued under the Bankruptcy Code. The rules require the agency to promote expertise of insolvency professionals registered with the IPA under the code.

Last month, the Centre had come out with draft regulations for the registration of insolvency professionals and agencies and model by-laws under the code. It also notified draft regulations pertaining to the insolvency resolution process for firms, the liquidation of insolvent firms and applications to judicial authority. The rules were put out for public comments till 31 October.

Earlier this month, the insolvency and bankruptcy board, chaired by M.S. Sahoo held meetings to discuss the public comments and finalize draft rules to be notified under the code, taking stakeholders’ views into consideration.

The law on bankruptcy envisages creating a complementary ecosystem, including insolvency professionals, information utilities and a bankruptcy regulator.

The insolvency and bankruptcy law is overarching in nature, covering individuals, companies, limited liability partnerships and partnership firms, and will also deal with corporate insolvency.

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Published: 22 Nov 2016, 02:56 PM IST
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