The President of India Sh. Ram Nath Kovind has given his approval to promulgate the Insolvency and Bankruptcy Code (Amendment) Ordinance, 2018.
Benefits
- Home Buyers: The Ordinance provides recognizes home buyers as financial creditors. This would give them due representation in the Committee of Creditors and make them an integral part of the decision making process.
- MSMEs: Ordinance empowers the Government to provide MSMEs with a special dispensation under the Code. It does not disqualify the promoter to bid for his enterprise undergoing Corporate Insolvency Resolution Process (CIRP). Central Government is allowed further exemptions or modifications with respect to the MSME Sector, if required, in public interest.
Case Withdrawl
- In order to protect the sanctity of the Corporate Insolvency Resolution Process, the Ordinance lays down a strict procedure if an applicant wants to withdraw a case after its admission under IBC 2016. Withdrawal would be permissible only with the approval of the Committee of Creditors with 90 per cent of the voting share.
- Withdrawal will only be permissible before publication of notice inviting Expressions of Interest (EoI).
Other Key Highlights
- The voting threshold has been brought down to 66 per cent from 75 per cent for all major decisions. The voting threshold for routine decisions has been reduced to 51% for the corporate debtor to continue as a going concern during the CIRP
- The existing Section 29(A) of the IBC, 2016 has also been adjusted to exempt pure play financial entities from being disqualified on account of NPA.
- Resolution application holding an NPA by virtue of acquiring it in the past under the IBC, 2016, has been provided with a three-year cooling-off period.
- The Ordinance provides for a minimum one-year grace period for the successful resolution applicant to fulfil various statutory obligations required under different laws.
- Ordinance include non-applicability of moratorium period to enforcement of the guarantee
- Liberalizing terms and conditions of interim finance to facilitate financing of the corporate debtor during CIRP period
(Source PIB)
Expected Questions
Which of the following statements is/are true regarding Promulgation of the Insolvency and Bankruptcy Code (Amendment) Ordinance, 2018?
(i) Home buyers will be recognized as financial debtors.
(ii) Central Government is not allowed further exemptions or modifications in Insolvency Resolution Process with respect to the MSME Sector
(iii) The voting threshold has been brought down to 66 per cent from 75 per cent for all major decisions.
a. All are true.
b. None is true
c. Only (i) is true
d. Only (ii) is true
e. Only (iii) is true
