Amendment to the Insolvency and Bankruptcy Code (IBC)

The proposed amendment to the IBC aims to enhance the efficiency and governance of insolvency processes while aligning with international best practices. The amendment seeks to address various challenges faced by the current framework.

Key Objectives

• Reduce procedural delays and maximize stakeholder value.
• Introduce out-of-court mechanisms for handling genuine business failures.
• Implement group and cross-border insolvency frameworks.
• Foster a culture of accountability and credit discipline among debtors.

Challenges in the Current IBC Framework

• High case backlog and lengthy delays in case admissions and resolutions.
• Significant "haircuts," or financial losses, for creditors.
• Shortage of qualified personnel and deviations from core principles.

Proposed Amendments

• Admission Delays
  • Insolvency applications filed by financial creditors must be admitted if the default is proven, procedural compliance is completed, and there is no disciplinary action against the resolution professional.
  • Financial institution records are to be considered conclusive proof of default.
  • National Company Law Tribunal (NCLT) to strictly enforce a 14-day timeline for case admissions.
• Out-of-Court Resolution
  • Introduction of a creditor-initiated insolvency resolution process (CIIRP) with out-of-court initiation for genuine business failures.
  • Financial creditors need consent from those representing at least 51% of outstanding debt.
  • The resolution is to be concluded within 150 days, with an option to convert to a standard corporate insolvency resolution process (CIRP) if needed.
• Group and Cross-Border Insolvency Frameworks
  • Facilitation of coordinated proceedings for entities within the same corporate group.
  • Establishment of a common resolution professional and joint panel of creditors for group companies to save time and costs.
  • The cross-border framework aims to integrate India's insolvency process with global standards, enhancing investor confidence and asset recovery.

Other Key Provisions

• Empowerment of the Committee of Creditors (CoC) to supervise liquidations and replace liquidators via a 66% vote.
• Extension of moratorium on assets to the liquidation process.
• Mechanisms to facilitate the rescue of viable companies and management of negligible assets.
• Introduction of provisions to prevent fraudulent transactions and clarify the priority of government dues.