economy

Govt plans more consultations to finalize amendments to IBC

Govt plans more consultations to finalize amendments to IBC

The government is set to hold a second round of public consultations, starting this week to finalize amendments to the Insolvency and Bankruptcy Code (IBC) to roll out a cross-border insolvency regime, said a person privy to the development. As a result, the amendment bill, scheduled to have been introduced in the current session of Parliament, will be tabled in the Budget session. The additional time is needed to incorporate public feedback on the new suggestions that the ministry of corporate affairs will make in a new consultation paper. The government wants to be doubly sure about making any significant changes to the bankruptcy code, given that it entails balancing the competing interests of shareholders, lenders and operational creditors. In the first round of consultation that ended on 15 December, the ministry proposed adding a new chapter on cross-border insolvency, extending certain rights to domestic and foreign creditors when companies in multiple jurisdictions start sinking. The bill is also likely to address suggestions made by a parliamentary standing committee about improving the efficiency and outcomes of the bankruptcy resolution process. The code has evolved rapidly with frequent amendments to be responsive to the changing needs, depending on broader trends in the economy. But it has led to litigation over the turnaround schemes proposed by lenders in many cases. Also, it has been used by operational creditors like vendors as a recovery tool. Given the impact such changes could have on companies, the corporate affairs ministry limited the scope of a new low-cost, alternative resolution scheme rolled out in April—the pre-pack scheme—to micro, small and medium enterprises till adequate experience about its working is gained. “During discussions with experts and bankers, several new ideas have come up regarding further amendments to the code. The second round of consultations will start shortly to seek public views on this, the person cited above said. Given the strong foreign direct investment inflows even during the pandemic, rolling out a cross-border insolvency regime may further comfort foreign investors if an investment in India turns sour. The move to expand the new bankruptcy regime to tackle the failure of businesses present in multiple markets comes as the government is courting sovereign wealth funds and pension funds to invest in the infrastructure sector. In the first consultation paper, the ministry proposed to let foreign creditors and bankruptcy professionals take part or initiate bankruptcy action in an Indian tribunal. The proposed new section in IBC—to be called Part Z— based on a UN model law would also cover Indian lenders requiring assistance in another country against Indian businesses and corporate guarantors with overseas assets. Download.

economy 2021-12-20 Livemint