Wednesday, June 15, 2016

Rajya Sabha passes Bankruptcy Code

The Parliament has passed the Insolvency and Bankruptcy Code Bill, enabling a single law to deal with distressed companies, their promoters, creditors, employees and other stakeholders for the first time in India.

Key notes

  • Law allows early identification of financial distress to help revive a company
  • 75% of creditors have to agree on a revival plan
  • Individuals to be given a chance of ‘Fresh Start’, where outstanding debt will be written off
  • Allows for insolvency regulator; says regulatory powers with govt till such body is set up
  • Specifies penalties for offences committed under corporate insolvency
  • Penalty will be imprisonment up to five years, or a fine up to Rs 1 crore, or both.
  • Debt Recovery Tribunal mooted as adjudicating authority for individuals/ unlimited liability entities
  • National Company Law Tribunal to be adjudicating authority for companies/ limited liability entities

Under the new code, employees and workmen will have first right during liquidation of assets under the law followed by secured creditors.


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