Big Win - Bankruptcy Bill - Implementation Now
Bankruptcy Law is a major win and will help in ensuring likes of Vijay Mallayas do not escape like this. Below are the highlights of the law. Can we please discuss how the Govt should go about implementation of the same so it becomes a reality.
The Insolvency and Bankruptcy Code, 2015
Highlights of the Code
The Code creates time-bound processes for insolvency resolution of companies and individuals. These processes will be completed within 180 days. If insolvency cannot be resolved, the assets of the borrowers may be sold to repay creditors.
The resolution processes will be conducted by licensed insolvency professionals (IPs). These IPs will be members of insolvency professional agencies (IPAs). IPAs will also furnish performance bonds equal to the assets of a company under insolvency resolution.
Information utilities (IUs) will be established to collect, collate and disseminate financial information to facilitate insolvency resolution.
The National Company Law Tribunal (NCLT) will adjudicate insolvency resolution for companies. The Debt Recovery Tribunal (DRT) will adjudicate insolvency resolution for individuals.
The Insolvency and Bankruptcy Board of India will be set up to regulate functioning of IPs, IPAs and IUs.
Key Issues and Analysis
Time-bound insolvency resolution will require establishment of several new entities. Also, given the pendency and disposal rate of DRTs, their current capacity may be inadequate to take up the additional role.
IPAs, regulated by the Board, will be created for regulating the functioning of IPs. This approach of having regulated entities further regulate professionals may be contrary to the current practice of regulating licensed professionals. Further, requiring a high value of performance bond may deter the formation of IPAs.
The Code provides an order of priority to distribute assets during liquidation. It is unclear why: (i) secured creditors will receive their entire outstanding amount, rather than up to their collateral value, (ii) unsecured creditors have priority over trade creditors, and (iii) government dues will be repaid after unsecured creditors.
The Code provides for the creation of multiple IUs. However, it does not specify that full information about a company will be accessible through a single query from any IU. This may lead to financial information being scattered across these IUs.
The Code creates an Insolvency and Bankruptcy Fund. However, it does not specify the manner in which the Fund will be us more
The Insolvency and Bankruptcy Code, 2015
Highlights of the Code
The Code creates time-bound processes for insolvency resolution of companies and individuals. These processes will be completed within 180 days. If insolvency cannot be resolved, the assets of the borrowers may be sold to repay creditors.
The resolution processes will be conducted by licensed insolvency professionals (IPs). These IPs will be members of insolvency professional agencies (IPAs). IPAs will also furnish performance bonds equal to the assets of a company under insolvency resolution.
Information utilities (IUs) will be established to collect, collate and disseminate financial information to facilitate insolvency resolution.
The National Company Law Tribunal (NCLT) will adjudicate insolvency resolution for companies. The Debt Recovery Tribunal (DRT) will adjudicate insolvency resolution for individuals.
The Insolvency and Bankruptcy Board of India will be set up to regulate functioning of IPs, IPAs and IUs.
Key Issues and Analysis
Time-bound insolvency resolution will require establishment of several new entities. Also, given the pendency and disposal rate of DRTs, their current capacity may be inadequate to take up the additional role.
IPAs, regulated by the Board, will be created for regulating the functioning of IPs. This approach of having regulated entities further regulate professionals may be contrary to the current practice of regulating licensed professionals. Further, requiring a high value of performance bond may deter the formation of IPAs.
The Code provides an order of priority to distribute assets during liquidation. It is unclear why: (i) secured creditors will receive their entire outstanding amount, rather than up to their collateral value, (ii) unsecured creditors have priority over trade creditors, and (iii) government dues will be repaid after unsecured creditors.
The Code provides for the creation of multiple IUs. However, it does not specify that full information about a company will be accessible through a single query from any IU. This may lead to financial information being scattered across these IUs.
The Code creates an Insolvency and Bankruptcy Fund. However, it does not specify the manner in which the Fund will be us more
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It is the old method that if any property is pledged to get the loan and the customer fails to repay it then the bank will check if the loan amount along with the interest exceeds the government value of the property, automatically they will send the notice to the party and move the property for auction. When the people Mallya issue comes, why a big talks raises rather than taking action through banks. Then what is the additional benefit for the banks through bankruptcy bill?? more
May 14
1. The issue of Bankruptcy and IP arise only to those Industries/ Businesses which were neglected to redress in time . The Sick Units have been identified and several concessions also were applied like Loan Re-schedulement , Funding of Interest , Single time Settlement etc., 2. The Bankers having the Working Capital Accounts and the Loan Accounts do have the knowledge and procedure of analysing and evolving methods of Revival of such Units to avoid from Sickness . 3. The Registrar of Companies also do have the system of analysis of Balance Sheet to take care of the Loans and Creditors only to save from Sick category and the Bankruptcy . 4. The Chartered Accountants working as Statutory Auditors and even the Internal Auditors do prior to 2 decades had the system of Comprehensive Audit of both financial and quantitative operations that really helped the then Units to be cautions of Bankruptcy or leading amalgamation etc., 5. The functionaries of Excise Duty and Sales Tax as also their Watch by Way-Bill and Chalan System had efficiently worked upto the end of 1991 - 2000 . THE QUESTION OF AMALGAMATION , BANKRUPTCY HAVE BEEN ARISING ONLY BECAUSE OF FAILURE OF THE ABOVE 5 SYSTEMS AND METHODS OF OPERATION . Therefore , immediately within 7 days of filing any Report on such issues , without waiting for filing of a Suit taking ample of time for verification and inspection to conclude , the Pass Ports of the Concerned Directors , Partners , and those proposed as connected are to be confiscated till the Case is lodged in a court of Law BESIDES ACUTE INVESTIGATION ON THE CONNECTED BODIES AND AUTHORITIES OF THE ABOVE 5 ACTIVITIES CONNECTED WITH SUCH BUSINESS PLEASE . more
May 12
