Insolvency & Bankruptcy Code & IBBI (Current Affairs / GS 2017-18) - WW.51(Download PDF)

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Next Week! ! Bharatmala Pariyojana: 👌 What is Insolvency, Bankruptcy & Liquidation? , Types of Loans? , 👌 What is NPA? , Need for a Code & Board? Single law for insolvency & bankruptcy.

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Insolvency & Bankruptcy Code & IBBI (Current Affairs/GS 2017 - 18) - WW. 51 (In English)

Dr. Manishika Jain explains Insolvency & Bankruptcy Code & IBBI What is Insolvency, Bankruptcy & Liquidation?

📝 Insolvency and Bankruptcy Code, 2016

  • Consolidate the existing framework

  • Minimize cost & time and make it economically viable

  • Protect small investors

  • Make doing business less cumbersome

  • Became effective in December 2016

  • Repealed Presidency Towns Insolvency Act, 1909 and Sick Industrial Companies (Special Provisions) Repeal Act, 2003

  • Features include – resolution, regulator (establish IBBI with 10 members), professional (licensed) and adjudicator

  • Understanding procedure - National Company Law Tribunal (NCTL)

Image of Framework of the Code

Image of Framework of the Code

Image of Framework of the Code

Insolvency and Bankruptcy Board of India (IBBI)

To approve a Resolution Plan, the antecedents, credit worthiness and credibility including promoters, are taken into account by the Committee of Creditors.

  • Institutional arrangement for the new insolvency and bankruptcy regime.

  • Created as the refereeing institution - creation of regulations and control of agencies.

  • Established on October 1, 2016 in accordance with the provisions of the ‘Insolvency and Bankruptcy Code, 2016’

  • Assisted by two advisory panels

Responsibility of IBBI

3 sets of regulations:

  • Regulations for Insolvency Professionals

  • Insolvency Agencies and Model Byelaws

  • Governing Board of Insolvency Professional Agencies

    Create a framework for the voluntary liquidation of any corporate person- any company incorporated under the Companies Act and includes limited liability partnership or any other person incorporated with limited liability but does not include any financial service provider, which specify the procedure for:

  • Public announcement

  • Receipt and verification of claims of stakeholders

  • Reports and registers to be maintained and submitted by the liquidator

  • Realization of assets and distribution of proceeds to stakeholders

  • Distribution of residual assets

  • Finally dissolution of corporate person

Insolvency Professionals

  • Insolvency professionals include advocates, CA, CS and cost accountants meeting conditions set by IBBI.

  • Regarding Insolvency Professional Agencies, not-for-profit companies with a turnover of at least Rs. 10 crore can apply for Agency license.

Powers and Functions of IBBI

  • Registration of insolvency agencies and professionals

  • Levying fees from them

  • Specify regulations and standards for agencies and professionals

  • Monitor and carry out inspections and investigations on these entities

Structure of IBBI (10 members)

  • One Chairperson- MS Sahoo (1st Chairman of IBBI)

  • Three members from Central Government officers not below the rank of Joint Secretary or equivalent.

  • One nominated member from the RBI.

  • Five members nominated by the Central Government; of these, three shall be whole-time members.

  • More than half of the directors of its board have to be independent directors.

📝 Need for New Regulation on Bankruptcy

  • Till now there were fragmented laws

  • Absence of a well-tailored corporate insolvency and bankruptcy regulation

  • IB Code provides basic legal framework to facilitate resolution process of companies this includes:

    • Legal foundation

    • Ecosystem or arrangements including a Bankruptcy Board

    • Insolvency Agencies and Insolvency Professionals etc. needed to make the Code effective

📝 New Regulations in October 2017

  • Amendments to the IBBI (Insolvency Resolution Process for Corporate Persons) Resolution Process, 2016 impose a greater responsibility on the Resolution Professionals and the Committee of Creditors in discharging their duties.

  • Now prior to approval of a Resolution Plan, the Resolution Applicants, including promoters, will be put to a stringent test with respect to their credit worthiness and credibility

  • Resolution Professionals must ensure that the Resolution Plan presented to the Committee of Creditors contains relevant details to assess the credibility of the Resolution Applicants.

  • Resolution Professionals must include details on Resolution Applicant in terms of:

    • Convictions

    • Disqualifications

    • Criminal proceedings

    • Categorization as willful defaulter as per RBI guidelines

    • Debarment imposed by SEBI, if any

    • Transaction, if any, with the Corporate Debtor in the last two years.

    • Transactions observed or determined, if any, covered under Section 43 (Preferential Transactions); Section 45 (Undervalued Transactions); Section 50 (Extortionate Credit Transactions); Section 66 (Fraudulent Transactions) under Insolvency and Bankruptcy Code, 2016

    November 2017 Amendments

  • Tainted promoter in control of an entity that has been a ‘non-performing asset’ to be disqualified from bidding the ailing entities for a “prescribed period”

  • Disqualifies a tainted promoter in control of an entity that has been a NPA for a “prescribed period”, which may be fixed at one year.

  • The government amended the law in less than a year to prevent promoters from acquiring the company at a steep discount, leaving banks with the pile of loans.

  • The ordinance also gives more powers to IBBI to prescribe eligibility norms for prospective bidders or resolution applicants in accordance with complexity and scale of operations of business of the ailing company.

Advantages of New Regulations

  • Resolution Applicants, including promoters, are put to a stringent test with respect to their credit worthiness and credibility.

  • Imposes greater responsibility on the Resolution Professionals and the Committee of Creditors in discharging their duties.

Focus Areas in News (Week 51 - 2017)!

  • 📝 Companies Amendment Bill 2017

  • 👌 List of 157 alien invasive animal species by ZSI (Prelims)

  • Losar Festival in Ladakh (Culture)

  • National Highways Investment Promotion Cell

  • 📝 Methanol Economy Fund (Environment) – NITI Aayog

  • DARPAN Scheme – Post Office

  • National Medical Council Bill

  • 📝 Sendai Framework

Forthcoming Lectures

  • International Court of Justice

  • Urban Waste Management

  • NDMA Guidelines

  • Wassenaar Arrangement

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Insolvency & Bankruptcy Code & IBBI (Current Affairs/GS 2017 - 18) - WW. 51 (In Hindi)

Dr. Manishika Jain explains Insolvency & Bankruptcy Code & IBBI What is Insolvency, Bankruptcy & Liquidation?

👌 implies important for Objective Questions/MCQ

📝 implies important for Subjective Questions

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- Published/Last Modified on: December 28, 2017

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