Union Government promulgates ordinance to amend Insolvency and Bankruptcy Code, 2016

The Union Government on 23 November 2017 promulgated ordinance to amend the Insolvency and Bankruptcy Code, 2016.

The Ordinance aims to prevent unscrupulous, undesirable persons from misusing the provisions of the Code. The amendments aim to bar individuals who are wilfully defaulters and are associated with non-performing assets or are habitually non-compliant, therefore, pose a risk to the company.

The Ordinance amends Sections 2, 5, 25, 30, 35 and 240 of the Insolvency and Bankruptcy Code, 2016 and inserts new Sections 29A and 235A in the Code.

Amendments to the Insolvency and Bankruptcy Code, 2016.
• Clause (e) of Section 2 of the Code has been substituted with three Clauses to facilitate the commencement of Part III of the Code relating to individuals and partnership firms in phases.
• Clause (25) and (26) of Section 5 of the Code which define “Resolution Plan” and “Resolution Applicant” are amended to provide clarity.
• Section 25(2)(h) of the Code is amended to enable the Resolution Professional, with the approval of the Committee of Creditors (CoC) to specify eligibility conditions while inviting Resolution Plans from prospective Resolution Applicants.
• Section 29A, new addition to the code, makes certain persons ineligible to be a Resolution Applicant. Those being made ineligible are Willful Defaulters, who are associated with non-performing assets, who have executed an enforceable guarantee in favour of a creditor.
• The Committee of Creditors can reject a Resolution Plan submitted before the commencement of the Ordinance where the Resolution Applicant is not eligible as per the new Section 29A.
• Section 30(4) is amended to explicitly obligate Committee of Creditors to consider feasibility and viability of the Resolution Plan.
• Through the amendment in Section 35(1)(f), sale of property has been barred to a person who is ineligible to be a Resolution Applicant under Section 29A.
• Section 235A, new addition to the code, provides for punishment for breaking provisions where no specific penalty or punishment was provided earlier.

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