IBBI seeks views on speeding up bankruptcy resolution
Premium- The discussion paper on ‘enhancing effectiveness of information utility’ seeks to address delays in admission of bankruptcy applications to the NCLT
New Delhi: The Insolvency and Bankruptcy Board of India (IBBI) is set to amend its rules relating to agencies handling credit information in order to speed up the rescuing of distressed companies under the bankruptcy code.
The bankruptcy rule maker has, in a discussion paper, sought public comments for amending rules relating to these agencies known as ‘information utilities’, by 29 April. These agencies are key in establishing payment defaults by debtors.
The discussion paper on ‘enhancing effectiveness of information utility’ seeks to address delays in admission of bankruptcy applications to the National Company Law Tribunal. Addressing this delay will help in achieving the goal of the bankruptcy code—resolution of distressed businesses and individuals in a time-bound manner for maximising the value of their assets.
This will help in lowering erosion of assets of the corporate debtor resulting in balancing the interests of all the stakeholders, IBBI said.
The move comes in the context of concerns raised by a parliamentary panel on the delays in admission of cases in tribunals. The Standing Committee on Finance had noted that one of the main reasons for the delay in the insolvency resolution process is the lag in the admission of applications in NCLT, IBBI said.
“As per Insolvency and Bankruptcy Code (IBC), the admission process should ordinarily be completed in 14 days from the date of filing application. However, there are large delays in admission of applications and information utility can assist by providing credible information," said the regulator.
Delays in the admission of application cause asset erosion, which can lower the perceived value of the business, as it lowers the book value of the assets associated with the company. Delays also open up the possibility of shareholders stripping the company of its assets and individual lenders filing applications with multiple agencies to recover their investment, delaying the admission further.
Strengthening the information provided by the information utility will help in speeding up the admission process, IBBI said.
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