Government to consider IBC change soon

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NEW DELHI : The Union cabinet is expected to consider a new set of reforms to the insolvency and bankruptcy code (IBC) this week with the idea of ​​introducing a bill in the current session of Parliament, said a person known with the discussions in government.

Changes proposed in the Insolvency and Bankruptcy Code Amendment Bill, 2022, include ways to quickly identify late payments that warrant bankruptcy proceedings, ways to restore dubious transactions and transactions by suspended management of maximize the defaulting business, and steps to enforce a code of conduct for creditors.

A separate chapter on cross-border insolvency is also part of the bill, according to the person, who spoke on condition of anonymity.

The planned reforms come at a time when the economy has largely recovered from the impact of the pandemic, but is facing new challenges due to rising input costs.

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The business ministry has consulted to improve the results of bankruptcy resolutions in terms of recovering investments that have soured and speedy decision-making — two key recommendations made by a standing parliamentary committee led by BJP leader Jayant Sinha in a report submitted last year. .

A second person, who also spoke on condition of anonymity, said several rule changes have already been made to improve IBC results and the proposed legislative changes lead to further improvements.

Questions sent to the spokesperson for the Department of Business Affairs on Wednesday went unanswered at the time of publication.

Experts said the time is right for further reforms in IBC, which over the past six years has seen a marked change in behavior in how India’s business community seeks to unlock the value of distressed assets.

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“With the pandemic largely abating, the time is right for the government to consider the next wave of reforms in the IBC,” said Vishwas Panjiar, partner, Nangia Andersen LLP, a consulting firm.

Panjiar said a robust cross-border insolvency framework is a key industry demand. Currently, the IBC complies with national law and deals with insolvent companies in India. There is no standard tool to restructure companies with assets and liabilities in both India and abroad – a shortcoming identified by the National Company Law Tribunal. “In shaping the legal framework for cross-border insolvency in India, the government should ensure that it is as consistent as possible with the laws abroad, as that would not only provide additional synergies, but also ensure conflict management and value creation, which are critical components to ensure the success of such a cross-border insolvency,” said Panjiar.

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According to the schedule of legislative work, the bill seeks to strengthen IBC by making certain changes to the corporate insolvency resolution and liquidation process “to further its goals of time-bound settlement of stressed assets while maximizing its value.”

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