Cabinet approves Insolvency and Bankruptcy Code (Second Amendment) Bill, 2019

Union Cabinet has approved certain amendments in Insolvency and Bankruptcy Code, 2016 (code), through Insolvency and Bankruptcy Code (Second Amendment) Bill, 2019. The amendments aim to remove certain difficulties being faced during insolvency resolution process to realise objects of code, protect corporate debtors, prevent ill-thought-out triggering of bankruptcy proceedings and to further ease doing of business (ADB).

Proposal: Amendment Bill seeks to amend sections 5(12), 5(15), 7, 11, 14, 16(1), 21(2), 23(1), 29A, 227, 239, 240 of Insolvency and Bankruptcy Code, 2016 (Code) and insert new section 32A in it.

Significance of Amendments to IBC

It aims to remove bottlenecks, streamline Corporate Insolvency Resolution Process (CIRP) and protect last mile funding in order to boost investment in financially distressed sectors of country.

It introduces additional thresholds for Financial Creditors represented by an authorized representative due to large numbers in order to prevent insignificant triggering of CIRP.

It also ensures that substratum of business of corporate debtor is not lost, and it can continue as a going concern by clarifying that permits, licenses, clearances, concessions, etc. cannot be terminated or suspended or not renewed during moratorium period.

Moreover, changes to IBC could also lead to- ring-fencing of corporate debtor resolved under IBC in favour of a successful resolution applicant from criminal proceedings against offences committed by previous promoters or management.

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