Insolvency and Bankruptcy Code (IBC) Amendment Bill
The government has proposed significant changes to the insolvency regime to expedite the admission, resolution, and liquidation processes. This includes concepts like group insolvency, cross-border insolvency, and pre-packaged insolvency for large corporations.
Key Amendments and Proposals
- The bill introduces a clause allowing the transfer of a personal guarantor’s assets to lenders during the insolvency resolution process.
- Claims by state or central authorities will be secured only with a contractual agreement, avoiding automatic priority under the IBC.
- The group insolvency framework addresses the complexities of multi-entity corporate structures to minimize value erosion and enable coordinated creditor decision-making.
- An out-of-court initiation mechanism for genuine business failures aims to facilitate faster and more cost-effective insolvency resolution.
- Cross-border insolvency provisions will align India’s framework with international best practices to protect stakeholder interests and boost investor confidence.
Specific Procedures and Requirements
- A financial creditor must secure the consent of creditors representing 55% of the debtor’s outstanding debt before initiating the process.
- The process should conclude within 150 days, extendable by 45 days by the adjudicating authority.
- The Competition Commission of India’s (CCI) approval is required before submitting an insolvency resolution plan to the adjudicating authority.
Expected Outcomes
- The amendments aim to reduce delays, maximize value for stakeholders, and improve governance of insolvency processes.
- They are expected to ease pressure on the judiciary, improve the ease of doing business, and expand access to credit.
- Experts believe the framework could aid the recognition and recovery of overseas assets, addressing enforcement challenges.
Overall, the proposed reforms demonstrate a comprehensive approach to refining the insolvency resolution landscape, ensuring that processes are faster, more efficient, and in line with global standards.
