The government is set to propose new amendments to the Insolvency and Bankruptcy Code (IBC) during the monsoon session of Parliament aimed at reducing delays in admitting bankruptcy petitions to the courts and speed up the rescue of struggling businesses, said a person familiar with the development.
The changes are based on input from two rounds of public consultations.
The monsoon session usually starts in July. Two key elements that would be introduced into the bankruptcy code through the proposed amendments. One is a framework for cross-border insolvency resolution, and the other is more effective means of dealing with inappropriate pre-bankruptcy transactions of the troubled company that affect the interests of stakeholders, said the person who spoke on condition of anonymity.
At present, the proposed amendments are at the inter-ministerial consultation stage and they will need to be approved by the cabinet before being tabled in parliament, the person added.
The amendments will also seek to address concerns raised by a standing parliamentary finance committee over the performance of the IBC – delays in resolving bankruptcy cases and steep haircuts taken by lenders while agreeing to restructure troubled businesses .
An email sent to the spokesman for the Department of Business on Tuesday went unanswered at the time of publication.
The Insolvency and Bankruptcy Board of India (IBBI), the regulatory body that oversees bankruptcy rules and regulations, has issued several rule changes in recent months aimed at reducing delays in admitting cases to the courts. law courts. These include a set of proposals to make the provision of credit information more efficient in order to speed up the process. The IBBI has identified that the availability of reliable information establishing default is crucial for the timely admission of bankruptcy petitions to court, as promoters of defaulting companies would attempt to delay the process fearing loss. impending corporate control.
One of the ways to improve the value of the assets available for the restructuring of a failing business is to recover any assets that have been “wrongfully disposed of” — a technical term for misappropriated or disposed of — during the period preceding bankruptcy. The amendments provide for a review of the past behavior of troubled companies over a longer pre-bankruptcy period than is currently allowed and take corrective action in the event of transactions that harm the interests of stakeholders.
Currently, the IBC allows resolution professionals to ask the courts to set aside an undervalued transaction of the bankrupt company dating back up to two years from the date of admission in the case of related party transactions and up to one year in other cases.
Experts said reviewing past transactions would help improve the outcome of IBC proceedings. “…Improving the pre-bankruptcy transaction review of the troubled entity will help with that,” said Pavan Kumar Vijay, founder of advisory firm Corporate Professionals.