IBC Amendments 2019

The Parliament and the President passed the amendments proposed to the Insolvency and Bankruptcy Code (IBC) of 2016 through the introduction of the Insolvency and Bankruptcy (Amendment) Act in 2019. Widely considered landmark legislation, the IBC initiated a significant shift in the recovery and resolution process. To tackle emerging challenges, the Government of India addressed these issues through amendments in the IBC (Amendment) Act 2019. This article delves into these amendments and their implications.

Highlights of the Bill

The Insolvency and Bankruptcy Code (Amendment) Bill of 2019 significantly impacts the IBC 2016 and ongoing insolvency proceedings. Here are the major highlights:

Section 5(26): Corporate Restructuring

The Resolution Plan, proposed by a resolution applicant, facilitates the restructuring of a corporate debtor. The 2019 Amendment clarifies that it can include provisions for restructuring through mergers or demergers.

Learn more about the role and responsibilities of a Resolution Professional in the corporate restructuring process.

Section 7(4): Timely Disposal of the Resolution Application

This amendment mandates the Adjudicating Authority to ascertain the existence of default within 14 days of receiving an application. Sub-section (5) requires an order of admission or rejection of the application within the prescribed time, with recorded reasons if not adhered to.

Section 12: Timeline for Corporate Insolvency Resolution Process (CIRP)

The maximum duration for completing the Corporate Insolvency Resolution Process is set at 330 days, including extensions and legal proceedings. The amendment also mandates completion within 90 days for those pending beyond this period.

For a detailed understanding of the stages of the Corporate Insolvency Process under this amendment, explore further insights.

Section 25A: Voting by Authorised Representatives

Section 25A(3) specifies that an authorised representative must vote based on the financial creditor's instructions. A new Sub-section (3A) mandates voting as per majority decisions when no prior instructions are provided.

Section 30: Treatment under Resolution Plan

This amendment affects inter-creditor payment distribution, ensuring operational creditors receive at least as much as they would in liquidation. Payments to dissenting financial creditors must align with the Insolvency and Bankruptcy Board regulations, prioritizing fairness to reduce legal interventions.

Understand the benefits and challenges for operational creditors under these amendments.

Section 31: Resolution Plan Binding on All Stakeholders

Upon approval, a resolution plan binds all stakeholders, including Central and State Governments and local authorities. This change aims to eliminate delays from governmental or local claims post-approval.

Section 33(2): Liquidation before Resolution

This section empowers a committee of creditors to opt for liquidation at any stage if more than 66% agree, before the resolution plan's approval. Gain insights into the Corporate Insolvency Resolution Process to understand the impact.

Frequently Asked Questions

Common questions about IBC Amendments.

The Insolvency and Bankruptcy Code (Amendment) Act 2019 aims to address various challenges that emerged in the implementation of the Insolvency and Bankruptcy Code (IBC) of 2016. The amendments seek to streamline the insolvency resolution process and provide clarity on certain aspects of the original Code.

The amendment to Section 5(26) clarifies that a resolution plan under the IBC can include provisions for restructuring the corporate debtor through mergers or demergers. This clarity facilitates the implementation of resolution plans involving corporate restructuring.

The amendment mandates that the CIRP must be completed within 330 days, including any extensions or time taken for legal proceedings. For pending cases beyond 330 days, the resolution process must be completed within 90 days from the commencement of the amendment act.

The amendment allows authorized representatives to cast votes on behalf of financial creditors they represent, based on the instructions received from the creditors. If no instructions are provided, they can abstain from voting. Representatives must also follow the decision of the majority (50% or more) of the voting share of the creditors they represent.

The amendment requires that operational creditors receive an amount under a resolution plan that is not less than the amount they would have received in the event of a liquidation of the corporate debtor, or the amount they would have received if the distributed amount followed the priority specified in the liquidation waterfall under Section 53 of the IBC.

The amendment states that an approved resolution plan will be binding on the Central Government, State Governments, and local authorities to whom a debt is owed. This aims to prevent delays caused by these authorities raising demands after the plan's approval.

The amendment empowers the committee of creditors to approve the liquidation of a corporate debtor at any time during the CIRP, even before the preparation of the information memorandum, if a majority (66% or more) of the committee approves the decision.

The amendment states that the distribution of claims under a resolution plan must consider the order of priority among creditors, as per the liquidation waterfall provided in Section 53 of the IBC, including the priority and value of the security interest of secured creditors.

The amendment specifies that the payments to financial creditors who vote against a resolution plan will be determined as per the regulations set by the Insolvency and Bankruptcy Board of India, but the amount should not be less than what they would have received in the event of a liquidation of the corporate debtor.

Yes, the amendment has retrospective application for pending CIRP cases where a resolution plan has not been approved or rejected by the NCLT, or where an appeal or legal proceeding is ongoing against the NCLT's decision on a resolution plan, subject to the time limits prescribed by law.