The Insolvency and Bankruptcy Code (Second Amendment Bill), 2019

The proposal to make amendments in the Insolvency and Bankruptcy Code , 2016 through the Insolvency  and Bankruptcy Code ( Second Amendment ) Bill 2019 has been approved by the Union Cabinet. These amendments aim to reduce certain difficulties being faced during insolvency resolution process to realise the objects of the code and to further ease of doing business.

The amendment Bill seeks to amend various sections and introduce a new section 32A in the Insolvency and Bankruptcy Code,2016 .

Key Highlights of the Bill

·     The code to remove bottlenecks, streamline the CIRP and grant protection to last mile funding which will boost investment in financially distressed sectors and ensure that the foundation of the business of corporate debtor is not lost, and it continues as a going concern by clarifying that the licenses, permits concessions clearances etc. cannot be terminated or suspended or not renewed during that moratorium period.

·     Insolvency Commencement date in all cases will mean the date of admission of application for initiating CIRP.

·      Minimum threshold for homebuyers to file insolvency application An application for initiating Insolvency shall be filed jointly by at least 100 allottees under a real estate project or not less than 10% of the total number of allottees whichever is less. Additional thresholds introduced for Financial Creditors represented by authorised representative due to large numbers in order to prevent frivolous triggering of Corporate Insolvency  Resolution Process

·    Clarification regarding initiation of CIRP by Corporate Debtor- The bill seeks to clarify that corporate debtor who is disqualified from making an application for CIRP initiation u/s 11(a) to (d), shall not be prevented from initiating CIRP against another corporate debtor.

·        Resolution Professional’s role after the expiry of CIRP Period-

The Amendment Bill has  clarified that the affairs of the Corporate Debtor during the time-gap between the period of conclusion of CIRP and implementation of the successful resolution plan/ commencement of liquidation shall now be the responsibility of the RP only.

·       A new section 32Ahas been inserted. The section operates on three fronts

i)               Cessation of liability of corporate debtor in respect of offences committed prior to the commencement of the CIRP.

ii)              Prohibition on any action against any property if the corporate debtor covered under the resolution plan.

iii)           Requirement from corporate debtor and other persons to extend assistance and cooperation to any investigating authority .