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NEW DELHI : A panel of experts led by Insolvency and Bankruptcy Board of India (IBBI) chairperson M.S. Sahoo has recommended quick amendments to the bankruptcy code to allow corporate turnaround plans to be struck efficiently outside tribunals. and later approved by the judiciary, as an alternative to the regular process.

The panel said it is the right time to allow pre-packaged corporate bankruptcy resolution schemes. Pre-packaged resolution schemes, or pre-pack schemes, are those negotiated and struck out side bankruptcy tribunals and later placed before it for its approval. It saves time compared to the normal process.

“The code may be amended quickly, preferably by an ordinance, to provide for the formal part of pre-pack. The code may make a skeletal provision enabling pre-pack, while the informal part could be left to market practice or guided by self-regulation, guidelines, and best practices," said the panel’s report.

IBBI, which makes bankruptcy rules, has sought public comments on its proposals by 22 January. The panel recommended that pre-packaged schemes should have features of both formal and informal options. The pre-packaged schemes should be available to all corporate debtors and for any stress, pre- or post-default. The panel said it could be implemented in phases.

“It may commence in respect of defaults from 1 lakh to 1 crore and covid-19 defaults for which insolvency resolution process is not available today, followed by default above 1 crore, and then default from 1 to 1 lakh," the panel said.

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