ALSO READIBC 2016: Time to reboot the Code Insolvency ordinance: Defaulting promoters all set to lose their companies Lanco creditors to seek time extension to complete insolvency process Insolvency pangs: More transparency and tweaking of the IBC will help Changes to Insolvency Code: Banks likely to face legal tangle
A 14-member committee on reviewing the insolvency and bankruptcy code has recommended that a list of offences be prepared and those who fall in the list be barred from sending resolution plans, say sources.
Also, disqualification will be limited to six years from the day of conviction, if the recommendations are accepted. Currently, there is no limit.
The committee also recommended doing away with a provision that considers financial creditors who are connected with the debtor company by virtue of converting their debt into equity as a related party.
Lawyers stated that this would essentially take out bankers or any other financial institutions like NBFCs which convert their debt into equity as part of the strategic debt restructuring (SDR) from the list of entities barred from presenting resolution plans. They explain the government through the insertion of Section 29 A in IBC barred these players from presenting resolution plans.
The committee also said that it must be ensured that promoters who make their way into the committee of creditors by assigning themselves the debt must not take control of the committee of creditors.
The SEBI definition of "persons in concert" includes the company concerned, its holding company, or subsidiary of such company or company under the same management either individually or together with each other; a company with any of its directors, or any person entrusted with the management of the funds of the company; mutual fund with sponsor or trustee or asset management company; foreign institutional investors with sub-accounts etc.
Also, for the passage of the resolution plan, the committee suggested reducing the threshold of voting for the purpose of approving critical decisions from 75 per cent to 66 per cent. The critical decisions include extending deadline for restructuring beyond 180 days, replacement of resolution professionals, approval of resolution plan, approval for liquidation. In other matters, 51% vote is required.
The committee also recommended against extending a 270-day moratorium for restructuring a company after its case is admitted by the National Company Law Tribunal (NCLT).
The committee submitted its report to the government on Monday.
The committee, headed by Corporate Affairs Secretary Injeti Srinivas, was constituted to consider changes to the IBC. Apart from these, issues on the bankruptcy provisions, cross-border insolvency and the rights of home buyers were also looked into by the committee. The committee also had lawyers dealing with insolvency cases and Insolvency and Bankruptcy Board of India Chief M S Sahoo as members.