Government will soon consider IBC amendment

The proposed changes in the Insolvency and Bankruptcy Code (Amendment) Bill, 2022 include ways to quickly establish that a payment default has occurred that warrants bankruptcy action, suspicious transactions and trades by the suspended management of the defaulting company. Ways to maximize recovery from, and steps to enforce code of conduct for creditors.

The person, who spoke on condition of anonymity, said a separate chapter on cross-border insolvency is also part of the proposed bill.

The planned reforms come at a time when the economy has largely recovered from the effects of the pandemic, but is facing new challenges from rising costs.

The Corporate Affairs Ministry has consulted to improve the outcome of bankruptcy resolutions in terms of recovery of investments, which have turned sour and quick decision-making – a report by BJP leader Jayant Sinha-led Parliamentary Standing Committee Two major recommendations made by the

A second person, who also spoke on condition of anonymity, said that several changes have already been made to the rules to improve the IBC results and that further improvements are to be made to the proposed amendments to the law.

Queries sent to the spokesperson of the Ministry of Corporate Affairs on Wednesday remained unanswered at the time of publication.

Experts said the time is right for further reforms in the IBC, which in the last six years has led to a marked behavioral change in the way corporate India unlocks the value of distressed assets.

Vishwas Panjiyar, partner at Nangia Andersen LLP, a consultancy, said, “With the pandemic easing to a large extent, it is time for the government to consider the next wave of reforms in IBC.”

Panjiar said a strong framework to deal with cross-border insolvency has been a key demand of the industry. Currently, the IBC caters to domestic laws and handles insolvent enterprises located in India. There is no standard instrument for restructuring firms with assets and liabilities both in India and abroad – a shortcoming marked by the National Company Law Tribunal. “While creating the legal framework for cross-border insolvency in India, the government must ensure that it is in line with laws abroad, as this will not only provide additional synergies but also ensure conflict management and value creation, which is the key to this. These are important factors to ensure the success of such cross-border insolvency,” Panjiar said.

According to the Schedule of Legislative Business, the Bill seeks to strengthen the IBC by making certain amendments to the corporate insolvency resolution and liquidation process “to further its objectives of time-bound resolution of stressed assets while maximizing its value.”

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