InvestorQ : Is the government planning some changes to the bankruptcy code and what could be the implications of the same?
Anjana Aiyar made post

Is the government planning some changes to the bankruptcy code and what could be the implications of the same?

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Khushi Patel answered.
2 months ago
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In the first major rehaul of the bankruptcy code or what is better called the Insolvency and Bankruptcy Code (IBC), the government is planning some major changes to ensure that there is more value that can be salvaged from sinking businesses. Here is what is planned at a very macro level.

· To begin with, one of the proposal is to add more safeguards in the proposed cross-border insolvency regime. This will become part of a new chapter. This will facilitate the smooth participation of overseas creditors in legal proceedings in Indian tribunals. This will go a long way in ensuring rapid rescue of businesses that have assets and liabilities that are located in multiple geographies and legal jurisdictions.

· The roe of the bankruptcy tribunal will be expanded to give them greater discretion to look into areas other than just the payment default by the corporate debtor. For example, it can also call for certain favourable regulatory awards where the business can entire see a shift in fortunes.

· There is also discussion on the limits to this gate for defence against insolvency proceedings. Experts are of the view that this would not apply in case of wilful default or persistent default. In such cases, the adjudicating authority must admit insolvency if payment default is established. This should be an exception to previous point.

· One of the key aspects that the new legislation to be tabled in this parliament session will focus on is the mandating of preparation of a good qualitative information memorandum. This will form the basis on which investors take decisions to make bids. This will also make the task of advisors, valuers and bankruptcy practitioners easier.

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