The government- appointed Bankruptcy Law Committee has recommended aspeedy process and a timeline of six to a maximum of nine months to deal with insolvency and enable windingup of operations of a company or a limited liability entity. The draft law prepared by the panel has also proposed early identification of financial distress so that steps can be taken to revive the ailing company.
The committee has prescribed a timeline of 180 days for dealing with applications but it can be extended for another 90 days by the adjudicating authority, only in exceptional cases. During the insolvency resolution period, an interim resolution professional would manage the debtor. The professional would prepare a plan that needs to be approved by a majority of 75 per cent of voting share of the financial creditors. Once the plan is approved, the adjudicating authority must give its nod. However, if an insolvency resolution plan is rejected, the adjudicating authority will order for liquidation.
The 15- member committee, headed by TK Vishwanathan, a former Lok Sabha secretary- general, gave its report and its proposed Insolvency and Bankruptcy Bill, to Finance Minister Arun Jaitley on Wednesday. The finance ministry put the report and the draft Bill on its website, for feedback till November 19.
Shaktikanta Das, economic affairs secretary, said a draft Cabinet note would also be sent for inter- ministerial consultation. Once suggestions from here and from website feedback are incorporated, the Centre would decide on the recommendations. The matter would then go to the Cabinet and subsequently to Parliament, he said.
Earlier in the day, Jaitley said the government would endeavour to introduce the final Bill in the winter session of Parliament.
The legislation prepared by the panel has proposedearlyidentificationoffinancialdistress, sothatstepscouldbetakentorevivean ailing company. “ The Bill seeks to improve the handling of conflicts between creditors and debtors, avoid destruction of value, distinguish malfeasance vis- Ã - vis business failure, and clearly allocate losses in macro- economic downturns,” the report said.
It also lays down a “ clear, coherent and speedy process” for early identification of financial distress and revival of a company.
Among other recommendations, the Bill suggests an insolvency regulator, for oversight over professionals in this regard. It lays down a transition provision during which the central government will exercise all the powers of the regulator till the time one is set up. “ This will enable quick starting of the process on the ground, without waiting for the proposed institutional structure to develop,” the report states.
The Bill recommends the existing Debt Recovery Tribunals be the adjudicating authority for individuals and unlimited liability partnership firms. And, that the National Company Law Tribunal be the one for companies and limited liability entities. It also proposes setting up of information utilities, to collect and collate financial information from listed companies and their creditors.
Business Standard, New Delhi, 5th Nov. 2015
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