The ministry of corporate affairs (MCA) on Tuesday invited comments from stakeholders on “pre-packaged” insolvency resolution and insolvency resolution for group companies among other issues related to the Insolvency and Bankruptcy Code, 2016, and the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016.
In March this year, the government had reconstituted the Insolvency Law Committee as a standing committee, chaired by MCA secretary Injeti Srinivas, to analyse the functioning and implementation of IBC. It also wants the panel to identify issues impacting the efficiency of insolvency resolution and liquidation framework for corporates, individuals and partnership firms prescribed under the IBC and make suitable recommendations to address such issues.
Participants can submit their comments till May 7.
The government has invited comments from corporate debtors, creditor to a corporate debtor, insolvency professional, industry associations, law firms, investors, etc.
MCA has been mulling introducing pre-packaged insolvency, which is similar to the practice prevalent in the US and the UK, where creditors and shareholders can approach bankruptcy courts with a prenegotiated corporate reorganisation plan.
Pre-packaged insolvency resolution scheme allows creditors and shareholders to approach bankruptcy courts with a pre-negotiated corporate reorganisation plan. Such a step will aid the existing insolvency framework in India and cut costs as well as the time of resolution process.
Under a pre-packaged bankruptcy process, a company prepares a resolution plan in cooperation with creditors, which comes into effect once the company enters the corporate insolvency resolution process (CIRP).
In the US and the UK, a resolution of this nature has to be voted on by shareholders before a corporate debtor files it with a court or tribunal.