Corporate Affairs Ministry’s proposals on IBC

On December 23, 2021, the ministry of corporate affairs proposed ‘amendments to Insolvency and Bankruptcy Code (IBC)’ to speed up the rescue of distressed companies which are ending up in bankruptcy tribunals.

Key Points

  • Ministry suggested ways for faster admission of cases in tribunals to initiate the bankruptcy process as well as for faster adoption of revival plans stitched together by stakeholders.
  • Government also planned to hold second round of public consultation for finalizing amendments to the IBC.
  • Government has suggested to amend IBC for providing “a fixed time period for rejection or approval” of a corporate turnaround plan by the tribunal.
  • Ministry also suggests for quicker admission of cases by tribunals.

What is Insolvency and Bankruptcy Code, 2016?

Insolvency and Bankruptcy Code, 2016 is one of the biggest insolvency reforms in economic history of India. This code was enacted to reorganise and insolvency resolution of corporate persons, individuals and partnership firms in timely manner to maximize the value of assets to such persons.

Why was IBC formulated?

IBC was formulated because the era before IBC had several scattered laws related to insolvency and bankruptcy. This caused inadequate and ineffective results with undue delays. For instance,

  1. Companies Act to liquidate and wind up the company
  2. SARFAESI Act, for security enforcement.
  3. Recovery of Debts Due to Banks and Financial Institutions Act, 1993, for debt recovery by banks & financial institutions.

Time-consuming procedure, ineffective implementation and conflict in one of these laws, forced the Bankruptcy Law Reform Committee to draft and introduce Insolvency and Bankruptcy Law bill.

What are the objectives of IBC?

IBC were formulated with following objectives:

  1. To consolidate and amend existing insolvency laws.
  2. To simplify and expedite Insolvency and Bankruptcy Proceedings.
  3. To protect the interest of creditors in a company.
  4. To revive the company in a time-bound manner.
  5. To promote entrepreneurship.
  6. To set up “Insolvency and Bankruptcy Board of India”.

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