The Insolvency and Bankruptcy Code (IBC), 2016, has already been amended thrice till date The Union cabinet, chaired by Prime Minister Narendra Modi on Wednesday cleared amendments to the Insolvency and Bankruptcy Code (IBC) to ease the insolvency resolution process and promote ease of doing business.
Aimed at streamlining of the insolvency resolution process, the IBC Amendment Bill seeks to protect last-mile funding and boost investment in financially-distressed sectors, an official release said.
The development comes at a time the government seeks to strengthen the country's financial sector marred by huge bad assets and bank frauds to support economic growth.
The IBC (Second Amendment) Bill, 2019 is likely to be introduced in the current session of the Parliament.
This marksa fourth amendment to the government's flagship Insolvency and Bankruptcy Code which came into force in 2016.The Insolvency and Bankruptcy Code replaces laws such as the Sick Industrial Companies Act (SICA Act) and the Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest Act (SARFAESI Act), shifting the control of recovery process to creditors from borrowers.The latest changes to the IBCring-fence the successful bidders of stressed assets from the risk of criminal proceedings against offences committed by previous management and promoters, according to an official statement.The bill proposes a threshold for financial creditors to prevent frivolous triggering of corporate insolvency, in turn ensuring that bankruptcy is not invoked for small amounts.The amendment will protect the successful bidders in the recovery proceedings and boost confidence in the country's financial system, sayanalysts.The provisions allow the corporate debtor to continue as a going concern by clarifying that the licenses, permits, concessions and clearances cannot be terminated or suspended during the moratorium period."Approval by the cabinet to provide immunity to successful bidders under IBC is a great boost to IBC,"said Sapan Gupta, partner and national head of banking and finance at law firm Shardul Amarchand Mangaldas."This is a positive and timely step and will increase confidence among prospective buyers of stressed assets."In a separate development, the cabinet on the same day approved easier lending rules for non-banking financial companies to help them get more access to funds,loweringthe rating threshold for public sector banks to purchase high-rated pooled assets from financially sound non-banking financial and housing finance companies under the partial credit guarantee (PCG) scheme.Non-banking financial companies (NBFCs) - also known as shadow banks - have been key drivers of lending growth in India, with their consolidated balance sheet worth Rs 28.8 lakh crore ($400 billion) in 2018-19, based on central bank data.In the immediate future, the bill will provide a cushion to at least two high-profile transactions.
ArcelorMittal and JSW Steel are seeking to be ring-fenced from ongoing cases and immunity from future investigations before completing the acquisition of Essar Steel and Bhushan Power - Steel.