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Changes to Insolvency Code
Why is it in the news?
- The Rajya Sabha approved amending the three-year-old Insolvency and Bankruptcy Code (IBC).
- The amendments seek to end ambiguity and streamline the resolution process further.
More in the news
New Amendments:
- The Bill fixes a deadline of 330 days for resolving cases referred to the IBC. At present, the deadline is 270 days.
- It gives home buyers the status of a creditor giving them a say in the resolution in case a housing project goes bust.
- The amendments give committee of creditors of a loan defaulting company explicit authority over the distribution of proceeds in the resolution process.
- The amendment now equate distribution of amounts under a resolution plan with the manner it's allowed in case of liquidation, maintaining the hierarchy of lenders.
- Within the powers of the Committee of Creditors(CoC), commercial consideration would be taken into account when it comes to distribution proposed in resolution plan.
- The amendments are aimed at filling critical gaps in the corporate insolvency resolution framework while at the same time maximising value from the resolution process.
About Insolvency Code:
- The Parliament had enacted Insolvency and Bankruptcy Code in 2016.
- The Code offers a uniform, comprehensive insolvency legislation encompassing all companies, partnerships and individuals.
- The Code provides clear, coherent and speedy process for early identification of financial distress and resolution of entities if the underlying business is found to be viable.
- It suggests two options – a restructuring if the firm is viable and liquidation if it is not financially viable.
- Resolution should be done quickly and judiciously to ensure that business is not stuck.
Source
The Hindu.