Indian Finance Minister Nirmala Sitharaman on Thursday tabled the Insolvency and Bankruptcy Code (Second Amendment) Bill, 2019 which aims to eliminate difficulties faced by the country's business sector in insolvency-related matters.
Presented in Lok Sabha, the lower house of Parliament, the Insolvency and Bankruptcy Code (Second Amendment) Bill, 2019 was approved by the Union Cabinet on Wednesday.
The amendments in the law seek to remove bottlenecks in the corporate insolvency resolution process, wherein successful bidders will be protected from facing criminal proceedings for offences committed by those who have mismanaged companies in the past or those promoting the company.
The Insolvency and Bankruptcy Code came into force in 2016 and has already been amended three times. The latest changes pertain to various sections.
The government has been amending the code from time to time to address new developments and problems arising from its implementation.
Thursday’s proposed amendment bill comes after the central government had amended the Insolvency and Bankruptcy Code in August this year.
Apart from easing the corporate insolvency resolution process and ensuring the protection of last-mile funding to boost investments, the other amendments lawmakers are considering would block frivolous corporate insolvency resolution processes (CIRPs).
The code in its present form is also silent on the impact of past managements’ offences on corporate debtors after the initiation of the resolution process, which the government is determined to prevent from dissuading would-be investors.
The business sector has welcomed the latest government initiative, saying that once the bill becomes law, it will enhance its focus on ensuring sustenance and the recovery of businesses from bankruptcy. This, they said, is essential for driving growth and sustaining the economy.
The proposed Bill also addresses the issue of the cancellation of licenses, permits and clearances granted by the government or a regulatory body to operate in a specific sector. Such permits and clearances are subject to periodic compliance, which, if not adhered to, can lead to the regulator cancelling or revoking the license.
The amended code will ensure that any corporate debtor is able continue his or her company’s operations without having the fear of licenses or permits etc. being terminated or suspended during the moratorium period.
The Bill also seeks to amend provisions related to insolvency commencement dates and enhance the powers of the central government to notify financial service providers. It will become a law after receiving approval from both of India's houses and receiving Presidential assent.