BackGovt to consider IBC amendment soon
Changes proposed in the bill include ways of maximising recovery from dubious transactions
PremiumNEW DELHI : The Union cabinet is expected to consider a fresh set of reforms to the Insolvency and Bankruptcy Code (IBC) this week with the idea of introducing a Bill in the current session of Parliament, said a person familiar with the discussions in the government.
Changes proposed in the Insolvency and Bankruptcy Code (Amendment) Bill, 2022 include ways of quickly establishing that a payment default has taken place warranting bankruptcy action, ways of maximising recovery from dubious transactions and trades by the suspended management of the defaulting company, and steps to enforce a code of conduct for creditors.
A separate chapter on cross-border insolvency is also part of the proposed Bill, said the person, who spoke on condition of anonymity.
The planned reforms come at a time the economy has recovered to a great extent from the impact of the pandemic but is facing new challenges from surging input costs.
The ministry of corporate affairs has been holding consultations to improve the outcomes of bankruptcy resolutions in terms of recovery of investment that has gone sour and quick decision-making—two key recommendations made by a Parliamentary standing committee led by BJP leader Jayant Sinha in a report submitted last year.
A second person, who also spoke on condition of anonymity, said that several changes in rules have already been made to improve IBC outcomes and that the proposed amendments to the law seek to make further improvements.
Queries mailed to the ministry of corporate affairs spokesperson on Wednesday remained unanswered at the time of publishing.
Experts said the time is right for further reforms in IBC, which has in the past six years led to a marked behavioural change in the way corporate India seeks to unlock the value of distressed assets.
“With the pandemic largely subsiding, the time is ripe for the government to consider the next wave of reforms in the IBC," said Vishwas Panjiar, partner, Nangia Andersen LLP, a consultancy.
Panjiar said a robust framework dealing with cross-border insolvency has been a key ask of the industry. Currently, the IBC caters to domestic laws and handles insolvent enterprises based in India. There is no standard instrument to restructure firms with assets and liabilities in both India and abroad—a shortcoming flagged by the National Company Law Tribunal. “While forming the legal framework for cross border insolvency in India, the government should ensure that the same is in consonance with laws in foreign countries to the extent possible since that would not only provide added synergy but would also ensure conflict management and value creation, which are crucial components to ensure success of such a cross border insolvency," said Panjiar.
As per the schedule of legislative business, the Bill seeks to strengthen IBC by carrying out certain amendments to the corporate insolvency resolution and liquidation process “to further its objectives of time-bound resolution of stressed assets while maximising its value."
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