Please enable JavaScript.
Coggle requires JavaScript to display documents.
INSOLVENCY AND BANKRUPTCY CODE (Successes of Insolvency and Bankruptcy…
INSOLVENCY AND BANKRUPTCY CODE
Salient Features
Clear & Speedy Process for early Identification & Resolution of Financial Distress
for corporates & Limited Liability Partnerships (LLP)
distinct resolution processes
Fresh Start
Insolvency Resolution
Adjudication Authorities
National Company Law Tribunal (for companies and LLP) & Debt Recovery Tribunal (for individuals and unlimited partnership firms)
Information Utilities
To process financial information to be used in insolvency & bankruptcy proceedings
Insolvency Professionals
To handle commercial aspects of Insolvency Resolution Process (IRP)
Insolvency Professional Agencies
develop professional standards & code of ethics for IPs
Regulator
Insolvency & Bankruptcy Board of India for IPs IPAs & Information Utilities
Successes of Insolvency and Bankruptcy Code
Promising start
Resolution at pre-admission stage
Resolution of large accounts
Reduced time for resolution
Reduced loss in recovery
Impact of the law on credit markets
Impact of Section 29(A)
Section 29A prohibits wilful defaulters, promoters/management of company having non-performing debt for over a year or disqualified directors from participating in the resolution process
Uniform and universal application
Transparency in real estate
Focus on Outcome Neutrality
Challenges
Infrastructural constraints
Substantive issues
Perceived Bias against liquidation
Challenges in liquidation process
Liquidators under IBC require lenders to relinquish control
attachment of assets by the probe agencies like enforcement directorate (ED), income tax agency etc. for past investigations contributes to the delays
Complicated land ownership patterns of the corporate debtor further poses challenges to liquidation
Sanctification of the small:
Lack of clarity on cross-border insolvency law
India has not yet adopted UNCITRAL (United Nations Commission on International Trade Law) Model Law on Cross-Border Insolvency and therefore, requires bilateral agreements with individual countries to administer cross-border insolvency proceedings
Conclusion
need to urgently develop a policy framework for distressed asset investors to attract foreign investors in this space. In absence of competing bidders, valuation of assets will be impacted, causing further losses to banks and other creditors
A well-designed insolvency & bankruptcy law should differentiate between “financially distressed" firms & “economically distressed” firms
When the present value of the expected profits of a company is less than the total value of the assetsof the company, the company is economically distressed. Such a company can be profitably liquidated
if a company is not economically distressed but is merely unable to service its debts, it is financially distressed.