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Finance Minister Introduces Second IBC Amendment of 2019

Finance Minister Introduces Second IBC Amendment of 2019

It’s been three years since the introduction of the Insolvency and Bankruptcy Code:  a bill that soon became a nightmare to several insolvent business goliaths. However, such businesses aren’t the only ones to suffer; those who have credited them the money suffered the same. Although the goal of the code was to accelerate the insolvency resolution process, the entre thing was rushed. As a result, it took 3 amendments to make the code a bit bearable.

And now, we have another one. In the parliament session yesterday, our Financial Minister Nirmala Sitharaman introduced yet another amendment to the IBC code. This time, FM introduces to amend the insolvency law to make it more bearable yet again. What are these amendments? And what do they mean for your business? These are the questions we will try to answer through this article.

IBC Amendments 2019

You should know that it’s the second IBC amendment this year along after the first IBC amendment in 2019 earlier this year. The first amendment IBC bill of July 2019 introduced significant changes to bring together the creditors and debtors in some sort of understanding. The new amendment, which has the same goals, has now provided some more pointers about ease of business.

  1. Seizure, attachment or retention won’t be allowed of the assets: Corporate debtor’s assets won’t be taken any action against for the offences committed prior to the Insolvency process if such assets are part of the insolvency resolution proceedings.

What does this mean?

If your asset has been involved in some criminal dispute before you went into corporate insolvency, then it won’t face any case against that particular criminal case.

  1. Assets won’t bear any legal consequences: In case of criminal proceedings, the assets will remain untouched, even if the prosecution against managers and promoters can continue.

What does it mean?

The assets won’t face any criminal charges if they are involved in corporate insolvency proceedings. They will remain untouched.

  1. Party related to corporate debtor can offer a resolution plan: If you are related to the corporate debtor, then you are no longer barred from giving a resolution plan.   

What does it mean?

If you are related to a corporate debtor, then you can put forward a resolution idea. Earlier, you were banned from doing so.

  1. Government agencies beware of attaching themselves to insolvent assets: No government agency is allowed to be attached to assets of insolvent entities.

What does it mean?

In an effort to stop corruption, the government agencies are now not allowed to associate themselves with insolvent companies.

  1. Homebuyers rejoice: In case of insolvent real estate companies, 10% of homebuyers to whom they own money are required to start insolvency resolution.

Dubbed as IBC (Second Amendment) Bill, 2019, its goal is to streamline the process of insolvency resolution and give more room for the creditors and debtors to be able to resolve insolvency quicker.

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