Government plans to introduce bills to amend companies, insolvency laws in Parliament's monsoon session

April 13, 2023

Synopsis
The IBC, which came into force in 2016, provides for a market-linked and time-bound resolution of stressed assets. It has already undergone various amendments. On January 18, the ministry proposed a raft of changes to the IBC, including fast-tracking the process, expanding the scope of the pre-packaged framework and developing an electronic platform with minimal human interface.

India is looking to offer pre-packaged insolvency resolution process (PIRP) to bigger companies as part of large-scale changes to the Insolvency and Bankruptcy Code likely in the Monsoon session of Parliament.

A bill to amend the Companies Act could also be introduced in the same session, a senior government official said.

The session is likely to commence in late July or August.

The changes to the IBC will be based on the discussion paper floated by the ministry of corporate affairs in January which mooted Fast Track Corporate Insolvency (FIRP) through which corporate debtors of a company can choose to opt for a resolution process outside the judicial process.

The proposed changes could also expand the scope of PIRP. During Covid-19 outbreak, the government allowed debtors classified as micro, small and medium enterprises (MSMEs) to avail PIRP scheme to alleviate the disruption caused by IBC proceedings. While the mechanism may not be extended to all large companies, it is likely to allow companies below a certain turnover to avail it.

Under PIRP, the creditors can scout for potential buyers for the debtor company without having to put the company through a moratorium under IBC.

[The Economic Times]