Bankruptcy law- will it bring change?

bankruptcy law- your opinion

 

No idea. I think kharb or darth will have better ideas of such topics. If you have research reports on topic pl give link.

 

The Insolvency and Bankruptcy Code at a glance

Lok Sabha has passed the Insolvency and Bankruptcy Code 2016 on May 05, 2016. It covers individuals, companies, limited liability partnerships and partnership firms. The new code will speed up the resolution process for stressed assets in the country. It attempts to simplify the process of insolvency and bankruptcy proceedings. The highlights of bankruptcy code are enumerated hereunder:

1. Strict deadlines : Authority to decide insolvency applications within 180 days further, an extension of additional 90 days can be allowed

2. Fast track Insolvency process: Fast track process is available for Corporate- Debtor with low income and assets, Specified class of creditors and any other category notified by Govt. Under fast track process, 90 days time-limit to complete whole process and further an extension of 45 days is allowed

3. Adjudicating Authority:

- NCLT for Corporates

- DRTs for Individuals and Partnerships Firms

- NCLAT to act as Appellate Authority

4. Insolvency Regulator: To exercise regulatory authority over insolvency professionals, insolvency professional agencies and informational utilities

5. Stringent punishment to defaulter: The bill proposes upto five-year jail term to debtors for concealment of property and debars bankrupt individuals from holding any public office.

6. Initiation of Insolvency process

6.1 Who can initiate corporate insolvency process?

Financial Creditor: Financial creditor can file application before Adjudicating Authority for initiation of insolvency process against Corporate Debtor along with-

- Proof of default and Name of resolution professional to act as an interim resolution professional

Operational Creditor: creditor can initiate corporate insolvency process by giving 10 day notice to Corporate-debtor

Corporate Debtor: The Corporate Debtor himself can initiate corporate insolvency process by making a reference to adjudicating authority

6.2 Time-limit for admitting/rejection of plea: The Adjudicating Authority shall admit or reject application within 14 days of receipt

6.3 Declaration of moratorium: The Authority shall declare moratorium to avoid institution of suits, transferring of assets, foreclosure, etc.

6.4 Public announcement: It includes details of debtor, name of 'interim resolution profession' and last date of submission of claims.

6.5 'Interim resolution professional': Adjudicating authority to appoint interim resolution profession within 14 days from insolvency commencement date

6.6 Committee of creditors: Interim resolution professional shall constitute committee of creditors after collating all claims against debtors and determining their financial position. All decisions to be taken by 75% voting share of financial creditors. Resolution profession shall conduct the meeting of committee. Meeting may be in person or through electronic means

6.7 Submission and Approval of resolution plan: Any applicant can submit a resolution plan to resolution professional, such professional can forward the resolution plan to authority after taking creditors' approval.

6.8 Adjudicating Authority can order liquidation if:

- Resolution plan is not presented in given time

- Resolution plan is not as per rules

- Committee of creditors demands liquidation

- Debtor-company violates the terms of resolution plans

7. Appointment of Liquidator:

- Resolution professionals shall act as liquidator

8. Workmen dues to get priority: Workers' salaries for up to 24 months will get first priority in case of liquidation of assets of a company ahead of secured creditors.

9. Creation of 'insolvency information utilities'

- to collect, collate, authenticate and disseminate financial information from listed companies and financial and operational creditors of companies

(Source: taxmann)

 

Bankruptcy Code Positive Financial Sector Reform: Nomura

New Delhi: Insolvency and Bankruptcy Code is a very positive financial sector reform, especially for the banking sector, as it will give creditors a legal path for recovering their dues in a time-bound manner, according to a report by Japanesefinancial services major Nomura.

There are multiple laws dealing with insolvency in India which lead to delays, the report said.

The Bankruptcy Code will consolidate the existing framework and create a new institutional structure, it added.

"India currently ranks 136 in the World Bank's resolving insolvency ranking; it takes 4.3 years to resolve insolvency and the recovery rate (at 25.7 cents to a dollar) is very low. The Code will play a key role in improving the ease of doing business in India," Nomura said.

The Code is also seen as a big positive for the banking sector, which is currently burdened with stressed assets. As the Code gives banks (creditors) a legal path for recovering their dues in a time-bound manner, "it should make lenders more confident in lending and borrowers more accountable", Nomura added.

"Overall, the Code is a very positive financial sector reform, whose benefits will be visible in coming years," it said.

It further said the "timelines are tight", as the Budget Session ends on May 13. It will now be moved to the upper house, where the ruling BJP-led government does not have a majority.

Nomura said that if not in this session, the Code should be passed in the monsoon session of Parliament (July or August). "Its full implementation is expected to take time as the entire institutional structure (board, IPs, IPAs, IUs) needs to be established."

Insolvency and Bankruptcy Code Bill is a "transformational building block" for the economy and there would be one law dealing with bankruptcy while doing away with at least 12 different legislations, some of which are centuries old. This will also make the whole process more "transparent", Minister of State for Finance Jayant Sinha had said in Parliament.

https://profit.ndtv.com/news/bankin...sitive-financial-sector-reform-nomura-1404039