The Ministry of Corporate Affairs has invited the Public Comments on proposed changes to Corporate Insolvency Resolution and Liquidation Framework under Insolvency and Bankruptcy Code.
Based on the issues raised in the ILC and from various stakeholder consultations, the various changes are proposed to the Code to further its objectives of time bound resolution of stressed assets while maximising its value and balancing the interests of all stakeholders.
It has been proposed that financial creditors as prescribed by the Central Government may be required to submit only IU authenticated records to establish default for the purposes of admission of a Section 7 CIRP application. Where such IU authenticated records are not available, and for all other financial creditors, current options of relying on different documents for establishing default for admission of a Section 7 CIRP application may remain available. This will make the admission process significantly quicker and less cumbersome. Consequently, the AA would only be required to consider IU authenticated records as evidence of default for Section 7 applications filed by such financial creditors as prescribed.
Further, it has been proposed that a clarification by way of an explanation may be added to Section 26 to clarify that proceedings for avoidance of transactions and wrongful trading can continue after the approval of a resolution plan by the AA in CIRP.
“The Code may be amended to provide that the resolution plan should mandatorily specify the manner of undertaking proceedings for avoidance of transactions and wrongful trading if such proceedings are to be continued after approval of the plan. The plan may also be required to specify if the resolution professional would pursue such transactions/ trading or if any other person would do so after the approval of the plan,” the MCA proposed.
The Code should provide a fixed time period for approval or rejection of a resolution plan by the AA. Consequently, the Code is proposed to be amended to provide the AA with 30 days for approving or rejecting a resolution plan under Section 31. Where the resolution plan is not approved or rejected within this time period, the AA shall record reasons in writing for the same.
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