President approves Insolvency & Bankruptcy Code (Amendment) Ordinance, 2018
Dear Professional Colleague:
The President gave assent to promulgate the Insolvency and Bankruptcy Code (Amendment) Ordinance, 2018 on 6th June,2018. The complete ordinance can be accessed at the link below:
The Key highlights of the Ordinance are as follows:
1. Home buyers given the status of Financial Creditors: This would imply that the home buyers would be able to file petitions under the IBC code against errant developers and will also be included in the Committee of Creditors.
2. Exemptions to Micro, Small and Medium Sector Enterprises (MSME): The code will not disqualify the promoter to bid for his enterprise undergoing Corporate Insolvency Resolution Process (CIRP) provided he is not a willful defaulter and does not attract other disqualifications not related to default.
3. Withdrawal of cases permitted: Withdrawal of cases would be permissible before publication of notice inviting Expressions of Interest (EoI) with the approval of the Committee of Creditors with 90 percent of the voting share.
4. Clarity on timelines: The amendment will bring in further clarity by laying down mandatory timelines, processes and procedures for corporate insolvency resolution process. Some of the specific issues that would be addressed include non-entertainment of late bids, no negotiation with the late bidders and a well laid down procedure for maximizing value of assets.
5. Relaxation of voting thresholds: The voting threshold for all major decisions by Committee of creditors such as approval of resolution plan, extension of CIRP period, etc. lowered to 66% instead of earlier 75%. The voting threshold for routine decisions has been reduced to 51% to facilitate the corporate debtor to continue as a going concern during the CIRP.
6. Other security holders recognized in COC: The Ordinance also provides for a mechanism to allow participation of security holders, deposit holders and all other classes of financial creditors that exceed a certain number, in meetings of the Committee of Creditors, through the authorized representation.
7. Section 29A liberalized: Minimum 1 year grace period has been provided to the successful resolution applicant to remove disqualifications prescribed under Section 29A of IBC.
8. Other changes:
The other changes brought about by the Ordinance include non-applicability of moratorium period to enforcement of guarantee; introducing the requirement of special resolution for corporate debtors to themselves trigger insolvency resolution under the Code; liberalizing terms and conditions of interim finance to facilitate financing of corporate debtor during CIRP period; and giving the IBBI a specific development role along with powers to levy fee in respect of services rendered.
The complete ordinance is accessible at the link below.
We will be happy to answer any question that you may have regarding IBC.
Co-founder & Partner, eMinds Legal LLP