Insolvency and Bankruptcy Code Current Affairs - 2020
On July 26, 2020, the Insolvency and Bankruptcy Board of India Chief M S Sahoo announced that a special resolution framework for MSMEs is being prepared.
The Government of India has already suspended several provisions of Insolvency and Bankruptcy Code (IBC) to tackle COVID-19 crisis. It includes exemption of COVID-19 related debts. The GoI also passed the IBC (Amendment) Ordinance, 2020 to prevent companies from being pushed into insolvency. The Sections 7, 9, and 10 of the IBC were suspended.
The Insolvency Bankruptcy Code provides a time bound process to resolve insolvency.
What is the issue?
With the IBC being diluted by GoI, the number of Non-Performing Assets are to increase in the country. RBI is raising concerns about Government’s actions on diluting IBC. According to RBI, the IBC that is supposed to speed up the resolution and is now slowing it down. This will mainly have adverse impacts on MSMEs. According to the Financial Stability Report (FSR) recently released by RBI, the NPAs could rise to 14.7% by March 2021 from 8.5% in March 2020. The FSR is released by RBI twice a year, once in June or July and the next time in December.
Therefore, GoI is to come up with Special Insolvency Resolution Framework for MSMEs.
Tags: IBBI • Insolvency • Insolvency and Bankruptcy Code • Insolvency and Bankruptcy Code 2015 • MSME
The Government of India recently reconstituted the advisory panel on corporate insolvency resolution and liquidation process.
The IBBI recently reconstituted advisory panel by inducting four members. The committee was constituted in 2017 and is chaired by a noted banker Uday Kotak. The new members include Crisil MD Ashu Suyash, former chief economist at NSE Nirmal Mohanty, Edelweiss Group chairman Rashesh Shah and L&T Director R Shankar Raman.
The Committee will advise on matter relating to corporate insolvency resolution and liquidation.
The IBBI is a regulator that oversees insolvency proceedings in the country. It was established in 2016 under the Insolvency and Bankruptcy code. The code aimed to speed up resolution process of stressed assets. The Insolvency code attempts to simplify the process of insolvency and bankruptcy proceedings.
The IBBI board includes 10 representatives. It includes representatives from Reserve Bank of India, Ministry of Finance, law and corporate affairs.
Structure of the Board
The IBBI board is constituted as follows
- A Chairman
- Three members from the GoI and they cannot be lower than the rank of joint secretary
- One member from RBI
- Five members are nominated by the Central Government of which three function as full time members.