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Today the Cabinet clears key amendments to IBC bringing in much needed clarity to the Insolvency and Bankruptcy Code.

Today the Cabinet clears key amendments to IBC bringing in much needed clarity to the Insolvency and Bankruptcy Code.

Date : 17th July 2019.

Today the Cabinet clears key amendments to IBC bringing in much needed clarity to the Insolvency and Bankruptcy Code. My quick take on the likely impact of the amendments.

 

  • Now there will be a 330-day deadline for corporate resolution process in place, including litigation and other judicial processes.
    • Impact the intention seems to curb and address the deferments caused due to delay in admission of CIRP application which has of late emerged as a big challenge for many stakeholders including lenders.

 

  • The resolution plan would be binding on 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.
    • Impact This is likely to reduce uncertainty and thereby boost the investor confidence, specially of international investors in distressed asset space.

 

  • Committee of Creditors (CoC) may take the decision to liquidate the corporate debtor, any time after constitution of the committee and before preparation of Information Memorandum for the resolution.
    • Impact If the CoC is of the opinion that an acceptable resolution is unlikely, the ordeal of going through the entire CIRP can be avoided and liquidation can be resorted to saving valuable time and resources.

 

  • Allowing comprehensive corporate restructuring schemes such as mergers and demergers as part of the resolution plan.
    • ImpactA pro investor and much needed amendment and likely to lead in better recovery percentage for lenders.


  • Dissenting creditors and operational creditors have to accept liquidation value or sum offered in the resolution plan, whichever is higher.
    • Impact – This clarity will significantly bring down the litigation and provide more teeth in view of some of the recent judgments which many experts believe is not in sync with the intention of the Code.  

 

Please share your views / observations on avishek@optimusresolution.net

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