Insolvency Bill sets 330-day deadline for corporate resolution

This Bill amends the Insolvency and Bankruptcy Code, 2016 to set a strict 330-day deadline for completing corporate insolvency resolution processes and to ensure that operational creditors and dissenting financial creditors receive payments no less than they would in liquidation.

Who it concerns: Corporate debtors, financial creditors, operational creditors, the Committee of Creditors, the Adjudicating Authority, and the Insolvency and Bankruptcy Board of India (IBBI).

What the bill does

• Clarifies that a resolution plan may include corporate restructuring via merger, amalgamation, or demerger.
• Requires the Adjudicating Authority to record reasons in writing if it does not ascertain default within the specified time.
• Mandates that the corporate insolvency resolution process must be completed within 330 days from the commencement date, including time taken in legal proceedings.
• Provides that if the process is not completed within 330 days, it must be completed within 90 days of the Act's commencement.
• Allows the authorised representative of financial creditors to vote based on the decision of more than 50% of the voting share of the financial creditors they represent.
• Requires that operational creditors receive payment not less than the liquidation value or the amount they would receive under the priority order in section 53, whichever is higher.
• Requires that financial creditors who do not vote in favour of the resolution plan receive payment not less than the liquidation value of their debt.
• Clarifies that an approved resolution plan is binding on the Central Government, State Governments, and local authorities regarding statutory dues.
• Clarifies that the Committee of Creditors may decide to liquidate the corporate debtor at any time after its constitution until the confirmation of the resolution plan.

Also in the document

• The Bill is an amendment to the Insolvency and Bankruptcy Code, 2016.
• The Financial Memorandum states that the Bill would not involve any expenditure from the Consolidated Fund of India.
• The Bill delegates power to the Board to make regulations specifying the manner of payment of debts.