Ease lender approval norms for resolution plans: Govt panel
In a move aimed at ensuring that small creditors do not disrupt the resolution process under the bankruptcy law, a governmentappointed panel has suggested that a revival plan can be approved if two-thirds of the creditors endorse it against the current requirement of three-fourths.
This is one of the key recommendations proposed by the 14-member panel looking at fine-tuning the Insolvency and Bankruptcy Code (IBC), two senior officials aware of the deliberations told ET. Currently, the resolution professional needs the consent from 75 per cent of the creditors to act upon anything — from day-to-day operations to strategic decisions such as approving or rejecting a resolution plan.
The reduced approver threshold of 66 per cent of the lenders by loan value would apply, the proposal says, to key resolutions such as appointing, replacing or dismissing a resolution professional, approving or rejecting a resolution plan, and extending the deadline from 180 days to 270 days.
Day-to-day operations, such as related party transactions, appointment of a lawyer or an advisor, and approval of expenses will now need the consent of just 51 per cent of the creditors against 75 per cent now, according to the recommendations. The 14-member insolvency law committee was set up to identity factors that “impact the efficiency of the corporate insolvency resolution and liquidation framework” and make recommendations to address them.
The Corporate Affairs Secretary Injeti Srinivas told ET in an interview separately that the recommendations along with draft amendments to the IBC are likely to be presented toward the end of the month. “…This will speed up the resolution process.
In India, where the borrowing and number of lenders for each loan are too many, it is difficult to get the 75per cent consent and also meet the 270-day deadline within which a plan has to be approved,” pointed out M R Umarji, former executive director of the Reserve Bank of India and a member of the committee that drafted the IBC.
The Economic Times, New Delhi, 13th March 2018