There is no end to IBC changes. Like it happened in demonetisation exercise, IBC provisions are undergoing frequent changes.
Last month only, the Government issued an ordinance to amend the Insolvency and Bankruptcy Code (IBC) with the intent to stop persons (including promoters) with a non-performing account of more than a year who had not cleared the overdue amount, interest and other charges before the submission of a resolution plan of insolvent companies from taking part in the resolution process.
This ordinance was issued to avoid a backdoor entry for erring promoters to take control over their companies and taking benefit of their own misadventures and misdeeds. There was a lot of hue and cry from several quarter over this possibility.
However, the government seems to have had a change of heart very soon.
Supposedly, a bill is in making to replace the ordinance and allow the promoters of insolvent companies to participate in the resolution process, provide they to repay their dues. Such defaulters shall be eligible for submitting a resolution plan if they have cleared the outstanding amount in question before submitting the plan. The promoters may be given some time to clear the overdue amounts under the new norms specified in this regard. The new provisions may also ease some more norms to make the processes simpler and understandable.
There was a blanket ban on barred corporate guarantors of insolvent entities under the ordinance as well. The proposed Bill may provide some relaxation in this regard.
Further, entities like alternative investment funds (AIFs) and asset reconstruction companies (ARCs), banks shall be allowed to participate in bidding process.
One can hope these proposed changes make the IBC more practical and effective and desired objective of a speedy and fair resolution can be achieved.
About the author :
Bhumesh Verma is a lawyer with over 2 decades of experience in advising domestic and international clients on corporate transactions (M&A, Venture Capital, Private Equity, Startups, corporate advisory, etc.) and features in "The A-List - India's Top 100 Lawyers" by India Business Law Journal. He keeps writing frequently on FDI, M&A and other corporate matters and is a guest faculty as well. He can be reached at firstname.lastname@example.org.