Union Cabinet clears amendments to insolvency law

The Union Cabinet on Wednesday approved changes to the insolvency law, including provision to ring- fence successful resolution applicants from criminal proceedings with regard to offences committed by previous promoters of a company.

The amendments to the Insolvency and Bankruptcy Code (IBC) are aimed at removing certain difficulties being faced during insolvency resolution process to realise the objects of the Code and to further ease doing of business, an official release said.

The IBC (Second Amendment) Bill, 2019, seeks to change various sections as well as insert a new section in the law.

According to the release, the amendments would remove bottlenecks, streamline the corporate insolvency resolution process and that protection of last mile funding would boost investment in financially-distressed sectors.

"Additional thresholds introduced for financial creditors represented by an authorized representative due to large numbers in order to prevent frivolous triggering of Corporate Insolvency Resolution Process (CIRP)," it added.

In a significant move, there would be ring-fencing of corporate debtor resolved under the IBC in favour of a successful resolution applicant from criminal proceedings against offences committed by previous management/ promoters.

The amended Act would also ensure that the substratum of the business of corporate debtor is not lost. It can continue as a going concern by clarifying that the licences, permits, concessions, clearances etc. cannot be terminated or suspended or not renewed during the moratorium period, the release said.