Insolvency

Cabinet Approves Insolvency and Bankruptcy Code (Second Amendment) Bill, 2019

11.12.2019

The Union Cabinet chaired by the Prime Minister approved the proposal to make amendments in the Insolvency and Bankruptcy Code, 2016 (Code), through the Insolvency and Bankruptcy Code (Second Amendment) Bill, 2019. The amendments aims to remove certain difficulties being faced during insolvency resolution process and to further ease doing of business. The Code provides for re-organisation and insolvency resolution of corporate persons, partnership firms and individuals in a time bound manner for maximization of the value of assets of such persons, to promote entrepreneurship, availability of credit and balance the interests of all the stakeholders. The Amendment Bill seeks to amend Sections 5(12), 5(15), 7, 11, 14, 16(1), 21(2), 23(1), 29A, 227, 239, 240 and insert new Section 32A in the Code.

To remove bottlenecks, streamline the CIRP and protect last mile funding for boosting investment in financially distressed sectors, changes in provisions of Code are much needed. Additional thresholds are introduced for Financial Creditors represented by an authorized representative due to large numbers in order to prevent frivolous triggering of Corporate Insolvency Resolution Process (CIRP). Further, to ensure that the substratum of the business of corporate debtor is not lost, and it can continue as a going concern by clarifying that, the licenses, permits, concessions, clearances etc. cannot be terminated or suspended or not renewed during the moratorium period. The amendment is significant in order to ring-fence corporate debtor resolved under the IBC in favour of a successful resolution applicant from criminal proceedings against offences committed by previous management/promoters.

The Insolvency and Bankruptcy Code, 2016 is considered as the biggest economic reform. It offers a market determined, time bound mechanism for orderly resolution of insolvency, wherever possible, and orderly exit, wherever required. The Code envisages an ecosystem consisting of National Company Law Appellate Tribunal (NCLAT), National Company Law Tribunal (NCLT), Debt Recovery Appellate Tribunal (DRAT), Debt Recovery Tribunal (DRT), Insolvency and Bankruptcy Board of India (Board), Information Utilities (IUs), Insolvency Professionals (IPs), Insolvency Professional Agencies (IPAs) and Insolvency Professional Entities (IPEs) for implementation of the Code. With concerted efforts of all concerned, there has been considerable progress in terms of putting in place some of the key elements of the ecosystem and also operationalisation of provisions relating to corporate insolvency resolution and liquidation.

Tags : IBC Second Amendment Approval

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