The Union Cabinet has approved certain amendments to the Insolvency and Bankruptcy Code (IBC) during its meeting on Wednesday. The changes in bankruptcy law are meant to help investment in troubled sectors, protect corporate debtors, and to prevent ill-thought-out triggering of bankruptcy proceedings.
"The Union Cabinet... approved the proposal to make amendments in the Insolvency and Bankruptcy Code, 2016, through the Insolvency and Bankruptcy Code (Second Amendment) Bill, 2019. The amendments aim to remove certain difficulties being faced during insolvency resolution process to realise the objects of the code and to further ease doing of business," the government said in a statement.
The amendments approved by the Cabinet seek to reform sections 5(12), 5(15), 7, 11, 14, 16(1), 21(2), 23(1), 29A, 227, 239, 240, and insert new section 32A in the Insolvency and Bankruptcy Code, 2016, the government further added.
Amendments to the IBC aim to remove bottlenecks, streamline the Corporate Insolvency Resolution Process (CIRP) and protect last mile funding in ordet to boost investment in financially distressed sectors.
Additional thresholds introduced have been introduced by the means of these amendments for financial creditors represented by an authorised representative due to large numbers in order to prevent frivolous triggering of resolution process.
The amendments also ensure that the foundation of a corporate debtor's business remains safe, and it can continue as a going concern by clarifying that the licenses, permits, concessions, clearances, etc could not be terminated or suspended nor their renewal denied could be denied during the moratorium period.
Changes to the IBC could also lead to "ring-fencing corporate debtor resolved under the IBC in favour of a successful resolution applicant from criminal proceedings against offences committed by previous management/promoters."
ALSO READ: Reality Check: Challenges notwithstanding, IBC promises positive changes in bankruptcy law of India