Ibbi seeks views on accelerating bankruptcy resolution
New Delhi: The Indian Board of Insolvency and Bankruptcy (IBBI) is set to change its rules on agencies handling credit information to speed up the rescue of troubled businesses under the bankruptcy code .
The head of bankruptcy rules has, in a working paper, sought public comment on changing the rules for such agencies known as “public information services” by April 29. These agencies are essential in establishing debtor defaults.
The discussion paper on “Improving the Efficiency of Information Utility” aims to address delays in admitting bankruptcy applications to the National Company Law Tribunal. Closing this delay will help achieve the purpose of the bankruptcy code – the resolution of distressed businesses and individuals within a limited time frame to maximize the value of their assets.
This will help reduce the erosion of the debtor company’s assets, which will balance the interests of all stakeholders, IBBI said.
The move comes amid concerns raised by a parliamentary panel about delays in admitting cases to court. The Finance Standing Committee noted that one of the main reasons for the delay in the insolvency resolution process is the delay in admitting applications into NCLT, IBBI said.
“According to the Insolvency and Bankruptcy Code (IBC), the admissions process must normally be completed within 14 days from the date the application is submitted. However, there are significant delays in admissions and information service can help by providing credible information,” the regulator said.
Delays in admitting claims lead to asset erosion, which can reduce the perceived value of the business, as it reduces the book value of the assets associated with the business. The delays also open up the possibility for shareholders to strip the company of its assets and for individual lenders to file claims with multiple agencies to recover their investment, further delaying admission.
Strengthening the information provided by the information utility will help speed up the admissions process, IBBI said.
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