Insolvency and Bankruptcy Code (Second Amendment) Bill 2018

Insolvency and Bankruptcy Code (Second Amendment) Bill 2018

The amendments propose to reduce the minimum voting threshold for the Committee of Creditors (CoC) to 66 per cent, from the existing 75 per cent for key decisions.

The amendment will give a status of "financial creditors" to home buyers, making them an integral part of the decision-making process by due representation in the Committee of Creditors (CoC).

The amendment has also provisions to help speedier resolution of stressed assets in the MSME sector, these will help in strengthening the public sector banks and will prevent their denationalisation.

The amendment also requires the lenders deciding on a corporate rescue plan to first seek the approval of Competition Commission of India (CCI) before finalising the scheme.

The Insolvency and Bankruptcy Code, 2016 (IBC)

The Insolvency and Bankruptcy Code, 2016 (IBC) was passed in 2016 to provide one stop solution for resolving insolvencies which is a long process and does not offer an economically viable arrangement.

Under the act separate insolvency resolution processes are described for individuals, companies and partnership firms, where the process can be initiated by either the debtor or the creditors.

According to the act the resolution process should be completed within specified time limit, for companies 180 days, which may be extended by 90 days, if a majority of the creditors agree.

For start ups (other than partnership firms), small companies and other companies (with asset less than Rs. 1 crore), resolution process would be completed within 90 days of initiation of request which may be extended by 45 days.

Insolvency and Bankruptcy Board of India is also established under the act, the board has a total of 10 members from Ministries of Finance and Law, and the Reserve Bank of India.

Licensed professionals are also there to manage the insolvency process and to control the assets of the debtor during the insolvency process.

Two separate tribunals are established forindividuals and companies to oversee the process of the resolution:

1) The National Company Law Tribunal for Companies and Limited Liability Partnership firms.
2) The Debt Recovery Tribunal for individuals and partnerships.

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