New Delhi: The government on Monday introduced a bill in Parliament that will make it easier for sick companies to either wind up their businesses or engineer a turnaround. Called the Insolvency and Bankruptcy Code 2015, it will replace the existing bankruptcy laws and also simplify investors’ exit.
The bill was tabled in Lok Sabha by finance Arun Jaitley as the government plans to go ahead with its reform agenda despite a setback in its efforts to pass the constitutional amendments required to implement the goods and service tax (GST) by 1 April.
The proposed bankruptcy code will cover individuals, companies, limited liability partnerships, partnership firms and proposes a time-bound framework.
Once enacted, not only will it improve ease of doing business in India, it will also ensure better debt recovery for creditors. The bill will “consolidate and amend the laws relating to reorganization and insolvency resolution of corporate persons, partnership firms and individuals in a time-bound manner for maximization of value of assets of such persons, to promote entrepreneurship, availability of credit and balance the interest of all the stakeholders including alteration in the order of priority of payment of government dues and to establish an Insolvency and Bankruptcy Fund,” the government said.
With GST set to miss its 1 April 2016 deadline, the government is hoping that the bankruptcy bill will provide a boost to its reform agenda. It wants to enact the bill at the earliest so that it gets reflected in the World Bank’s ease of doing business rankings for next year, the cut off for which is 31 May. India is ranked 136 among 189 countries in the World Bank’s ease of doing business index in the category of resolving insolvency. India’s overall raking is 130.
Currently it takes, on an average, more than four years to resolve insolvency in India, according to the World Bank Ease of Doing Business report. The new code seeks to cut down the time to less than a year.
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