Amendment to the Insolvency and Bankruptcy Code (IBC)
The Finance and Corporate Affairs Minister introduced significant amendments to the IBC, focusing on creditor-initiated resolution, cross-border insolvency, and corporate group bankruptcy. These changes are aimed at expediting the resolution of bankrupt firms and preventing the erosion of value in stressed assets.
Key Amendments and Proposals
- Creditor-Led Resolution Framework:
- Allows a majority of unrelated financial creditors and debtors to resolve bankruptcy through out-of-court arrangements.
- Reduces the workload of the National Company Law Tribunal (NCLT) by empowering the committee of creditors.
- Introduces a 30-day objection period for corporate debtors.
- Cross-Border Insolvency:
- Proposes a basic structure with rules to follow, designating a dedicated bench for such proceedings.
- Facilitates easier access for creditors to overseas assets of stressed companies.
- Voluntary Group Insolvency Framework:
- Facilitates joint resolution of a domestic corporate group's stressed entities.
- Includes provisions for coordinated proceedings and shared insolvency professionals.
- Speeding Up Resolution:
- Mandates the NCLT to admit insolvency cases within 14 days and approve resolution plans within 30 days.
- Secured Creditor Agreement:
- Defines a lender as a secured creditor only with a bilateral commercial agreement with the debtor.
- Enhanced Penalties and Electronic Processes:
- Introduces enhanced penalties for frivolous litigation and mandates the use of electronic processes.
Expected Outcomes and Industry Reactions
- The amendments aim to improve resolution timelines, enhance creditor confidence, and reduce asset value erosion.
- They align India's insolvency regime with global best practices, enhancing efficiency and certainty for stakeholders.
- The potential improvements in operational processes.
- The reinforcement of the clean-slate principle post-resolution plan approval.
