Parliament passes Insolvency and Bankruptcy Code (Amendment) Bill, 2021- Check key features

The Insolvency and Bankruptcy Code (Amendment) Bill, 2021, will introduce an alternate insolvency resolution process for micro, small and medium enterprises (MSMEs).  It amends the Insolvency and Bankruptcy Code, 2016.

Created On: Aug 4, 2021 10:24 ISTModified On: Aug 4, 2021 10:24 IST

The Insolvency and Bankruptcy Code (Amendment) Bill, 2021, was passed by Parliament on August 3, 2021. Rajya Sabha approved the bill amidst the din. 

Earlier, the bill was passed by Lok Sabha on July 28, 2021, and was introduced in the Lower House of Parliament on July 26 during the ongoing Monsoon session.

The amendment bill was tabled by the Union Corporate Affairs Minister Nirmala Sitharaman. It amends the Insolvency and Bankruptcy Code, 2016.

The Bill replaces the Insolvency and Bankruptcy Code (Amendment) Ordinance, 2021, which was promulgated on April 4, 2021.

What will be new under the Insolvency and Bankruptcy Code (Amendment) Bill?

The latest amendment bill will introduce an alternate insolvency resolution process for the micro, small and medium enterprises (MSMEs), called the pre-packaged insolvency resolution process (PIRP).

The code will introduce a time-bound process to resolve the issue of insolvency of the corporate debtors (within 330 days) known as the Corporate Insolvency Resolution Process (CIRP).

What will happen under CIRP?

The debtor himself or its creditors will be able to apply for the initiation of CIRP in the event of a default of at least Rs. 1 lakh.

A committee of creditors, under CIRP, will be constituted to decide on the insolvency resolution.

The committee may consider a resolution plan which tropically provides for the payoff of the debt by acquisition, merger, or restructuring of the company.

If the committee of the creditors does not approve of the resolution plan within the specified time, the company will be liquidated.

During the Corporate Insolvency Resolution Process (CIRP), the affairs of the firm will be looked over and managed by the Resolution Professional (RP), who is appointed to conduct CIRP.

About Insolvency and Bankruptcy Code, 2016:

It was the bankruptcy law of India which sought to consolidate the existing framework by creating a single law for bankruptcy and insolvency.

The bill was passed by Lok Sabha on May 5, 2016, and by Rajya Sabha on May 11, 2016. The bankruptcy code is a solution to resolve bankruptcy and insolvencies which previously was a long process. Its purpose was to protect the interests of small investors and make the process of doing business less cumbersome.

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