Bankruptcy Code 2016: A new law for speedy windup
On Wednesday, Rajya Sabha passed the much awaited bankruptcy code and with the signature of Indian president, it will become a law. It will provide speedy resolution of bankrupt businesses. The bill is good news for businesses, banks and also individuals. Given the recent episodes of some of the industrialists go bankrupt and banks doing nothing ΓÇô this new law would provide banks a tool to better deal with in the cases of bankruptcy. According to Central Bank data, stressed assets rose to 14.5% in 2015 ΓÇô meaning 10 trillion dollars of loan are struck. RBI has been also tough on banks after the Sahara and Kingfisher episodes.
Previous laws such as Sick Industrial Companies Act, the Recovery of Debt Due to Banks and Financial Institutions Act and some laws started from Colonial period ΓÇô but the multiplicity of laws and concerned department has complicated the bad debts recovery process.
So how this law is different?
The insolvency cases will be resolved in minimum 180 and maximum 270 days. However, there will be new institutions helping in winding up the insolvency process on time. These would include:
ΓÇó Insolvency professionals, who will have knowledge of resolution process, taking over the companyΓÇÕs management and managing the liquidation process.
ΓÇó Insolvency Professional Agencies.
ΓÇó Information Utilities, which will collect debtorΓÇÕs data.
ΓÇó Insolvency and Bankruptcy Board of India, that will lead the institutions mentioned over.