In a significant move, the Union cabinet has cleared seven amendments to the Insolvency and Bankruptcy Code (IBC) that will enforce a strict 330-day timeline for corporate resolution process, including litigation and other judicial processes, as well as make resolution plan binding on all stakeholders. Presently, the resolution plan for an insolvent company has to be cleared within 270 days.
The amendments are aimed at filling critical gaps in the corporate insolvency resolution framework, maximising value from the resolution process as well as save time. The IBC has been amended twice so far. As per the amendment approved by the Cabinet, the resolution plan would be binding on all stakeholders including the central government, any state government or local authority to whom a debt in respect of the payment of the dues may be owed.
Further, the Committee of Creditors (CoC) may take the decision to liquidate the corporate debtor, any time after constitution of the committee and before preparation of Information Memorandum for the resolution. With the amendments, there would be more clarity on allowing comprehensive corporate restructuring schemes such as mergers and demergers as part of the resolution plan. Within the powers of the CoC, commercial consideration would be taken into account when it comes to distribution proposed in resolution plan.