The Rajya Sabha on Wednesday passed the Insolvency and Bankruptcy Code 2016, a vital reform that will make it much easier to do business in India.
Once the President signs the legislation, India will have a new bankruptcy law that will ensure time-bound settlement of insolvency, enable faster turnaround of businesses and create a database of serial defaulters.
Along with the proposed changes in India’s two debt recovery and enforcement laws, it will be critical in resolving India’s bad debt problem, which has crippled bank lending.
Highlights of Bankruptcy Bill:
– Consolidates into a single law a host of legislation that deal with the subject;
– Aims to speedily adjudicate such cases for higher recovery of debt and money;
– Allows operational creditors like employees to also call for insolvency resolution;
– Proposes Insolvency Regulator to exercise regulatory oversight over insolvency professionals, insolvency professional agencies and informational utilities;
– Moots two separate Insolvency Adjudicators — one with jurisdiction over companies and the other over insolvency and bankruptcy resolution of individuals;
– Proposes to regulate insolvency professionals and insolvency professional agencies, under regulator’s oversight;
– Proposes fast-tracking resolution of insolvency cases and improve recoveries of amount lent to companies within a timeline of 180 days, extendable by another 90 days;
– Proposes insolvency resolution process for individuals where the creditors and the debtor will engage in negotiations to arrive at an agreeable repayment plan of debts;
– Moots “Fresh Start” process for indigent individuals with income and assets lesser than specified thresholds; and
– Proposes insolvency information utilities which would collate, authenticate and disseminate financial information from listed companies and creditors of companies.
