The Union Cabinet on July 17, 2019, approved the proposal to carry out 7 amendments to the Insolvency and Bankruptcy Code, 2016, placing greater emphasis on more time-bound resolution and laying down voting rules of the financial creditors.
The Insolvency and Bankruptcy Code (Amendment) Bill, 2019, aims to fill critical gaps in the corporate insolvency resolution framework as enshrined in the Code, while simultaneously maximising value from the Corporate Insolvency Resolution Process (CRIP), the government said in a release.
Further adding that “The Government intends to ensure maximization of value of a corporate debtor as a going concern while simultaneously adhering to strict timelines.”
The salient features of the amendments are:
- Clarity on allowing comprehensive corporate restructuring schemes such as mergers, demergers, amalgamations etc. as part of the resolution plan.
- Greater emphasis on the need for time bound disposal at application stage.
- A deadline for completion of CIRP within an overall limit of 330 days, including litigation and other judicial processes.
- Votes of all financial creditors covered under section 21(6A) shall be cast in accordance with the decision approved by the highest voting share (more than 50%) of financial creditors on present and voting basis.
- A specific provision that financial creditors who have not voted in favor of the resolution plan and operational creditors shall receive at least the amount that would have been received by them if the amount to be distributed under the resolution plan had been distributed in accordance with section 53 of the Code or the amount that would have been received if the liquidation value of the corporate debtor had been distributed in accordance with section 53 of the Code, whichever is higher. This will have retrospective effect where the resolution plan has not attained finality or has been appealed against.
- Inclusion of commercial consideration in the manner of distribution proposed in resolution plan, within the powers of the Committee of Creditors.
- Clarity that the plan shall be binding on the all stakeholders including the Central Government, any State Government or local authority to whom a debt in respect of the payment of the dues may be owed.
- Clarity that the Committee of Creditors may take the decision to liquidate the corporate debtor, any time after constitution of the Committee of Creditors and before preparation of Information Memorandum.