NEW DELHI: The Central government constituted Insolvency Law Committee (ILC) has proposed a number of changes in the Insolvency and Bankruptcy Code (IBC) to enable faster closure of the corporate insolvency resolution process (CIRP).
One of the key changes that the committee has suggested in its draft proposal is to have a fixed time period of 30 days for the adjudicating authority to accept or reject the resolution plan submitted by the successful resolution applicant.
The law committee noted that the approval of a resolution plan that has already been approved by the committee of creditors (CoC) should not be inordinately delayed. “Such delays go against the objective of the Code to provide value-maximising outcomes for stakeholders,” says the Insolvency Law Committee.
It has also proposed changes in the law to enable quicker admission of cases in NCLT. For this they have suggested that the NCLT would only be required to consider information utility-authenticated records as evidence of default where insolvency applications have been filed by financial creditors. It has also proposed that financial creditors should submit only IU-authenticated records to establish default.
Information Utilities (IUs) are entities which store information about debtors – their financial liabilities, transactions, defaults, security interest etc. Closure of cases under IBC takes much longer with average time of 467 days against the 330 days prescribed under the Code.
Among other changes proposed include a provision of closure of voluntary liquidation process before dissolution of the company if there arise business opportunities that can make the company profitable or viable.
The committee has also proposed that proceedings against such avoidance transactions (fraudulent transactions) may continue even after the completion of the resolution process.
Besides, the threshold for the look-back period (for avoidance transactions) may be changed from the date of commencement of CIRP to the date of filing of the application for initiation of CIRP.