Following the second amendment in the Insolvency and Bankruptcy Code, 2016 being passed by the Union Parliament on 10.08.2018 the Union Cabinet on Wednesday cleared a slew of amendments to the Bankruptcy Code with an “aim to fill critical gaps in the corporate insolvency resolution framework as enshrined in the Code, while simultaneously maximizing value from the Corporate Insolvency Resolution Process (CIRP)” as per the press release by the Ministry of corporate affairs dated 17.07.2019.
A total of Eight amendments have been approved by the Union Cabinet ranging from completion of the entire resolution process, including litigation and other judicial process in 330 days as opposed to the maximum of 270 days sans the litigation/judicial process.
Also, the votes of all financial creditors covered under section 21(6A) shall be cast in accordance with the decision approved by the highest voting share(more than 50%) of financial creditors on present and voting basis.
The amendment also seeks to add a specific provision for the financial creditors who have not voted in favour of the resolution plan and operational creditors shall receive amount as per section 53 of the Code or the amount which would have been received if the liquidation value of the corporate debtor had been distributed in accordance with section 53 of the Code, whichever is higher and the same shall have a retrospective effect in cases where the resolution plan has not attained finality or has been appealed against.
Other amendments in the amendment are as follows:-
a) Clarity on allowing comprehensive corporate restructuring schemes such as mergers, demergers, amalgamations etc as part of the resolution plan.
b) Inclusion of commercial consideration in the manner of distribution proposed in resolution plan, within the powers of the Committee of Creditors.
c) Clarity that the plan shall be binding on the all stakeholders including the Central Government, any State Government or local authority to whom a debt in respect of the payment of the dues may be owed.
d) Clarity that the Committee of Creditors may take the decision to liquidate the corporate debtor, any time after constitution of the Committee of Creditors and before preparation of Information Memorandum.
The actual amendments can be viewed on the following link-