Finance Minister introduces IBC bill for faster bad loan resolution; key things to know

The bill seeks timely completion of debt resolution process under IBC and provides more clarity on the rights of stakeholders.

Written by FE News Desk

July 24, 2019 17:37 IST

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The NCLAT had trimmed lenders’ share of the recovery from 90% to 60%.

Finance Minister Nirmala Sitharaman has proposed The Insolvency and Bankruptcy Code (Amendment) Bill 2019 in the Rajya Sabha on Wednesday. The bill seeks timely completion of debt resolution process under IBC and provides more clarity on the rights of stakeholders. The finance minister has sought seven amendments to the Insolvency and Bankruptcy Code, which will provide for faster resolution of bad loans. The amendments aim to fill critical gaps in the corporate insolvency resolution framework and also seek to maximise value from resolution. Timely admission of applications and timely completion of the corporate insolvency resolution process are also among the agendas of Nirmala Sitharaman-proposed amendments.

Key proposals

Under the bill, the adjudicating authority will now be required to provide written reasons in writing if the authority fails to admit or reject the received application within 14 days.
The new resolution deadline for completion of CIRP (Corporate Insolvency Resolution Process) is now limited 330 days, including litigation and other judicial processes.
With the proposed changes, greater clarity on the rights and duties of authorised representatives of voters, the permissibility of corporate restructuring schemes, manner of distribution of amounts amongst financial and operational creditors as well as the applicability of the resolution plan on all statutory authorities is expected.
According to the bill, the Committee of Creditors may now take the decision to liquidate the corporate debtor. This can be done any time after the Committee of Creditors has been constituted and before preparation of Information Memorandum.
Provision has been made for votes of all financial creditors covered under section 21(6A). The votes shall be cast in accordance with the decision approved by the highest voting share (more than 50%) of financial creditors on present and voting basis.
The bill also says that the resolution plan will be binding on all the stakeholders including the Central Government, any State Government or local authority to whom the debt is owed.