Changes to Companies Act to fortify bankruptcy process notified

The government on Monday notified amendments to the Companies Act 2013 designed for more effective working of the Insolvency and Bankruptcy Code (IBC) and provides for initiating strict action against defaulting companies

The Companies (Amendments) Act 2017, which became law after the approval of the Rajya Sabha during Parliament's winter session in December, aims to strengthen corporate governance standards,improve ease of doing business in the country and puts restrictions on the managerial remuneration of defaulting companies.

As per an amendment, companies, which have defaulted on their dues to banks and financial institutions, will now require the prior approval of these creditors, besides approval in a general meeting in case the payment of managerial remuneration exceeds 11 per cent of the net profits, as was anyway required by the original Act.

Besides, "the Amendment Act now allows companies to issue shares at a discount to its creditors when its debt is converted into shares in pursuance of any statutory resolution plan such as resolution plan under the Insolvency and Bankruptcy Code or debt restructuring scheme," a Finance Ministry release said.

The changes to the Act also prohibit a registered valuer from undertaking valuation of any asset in which he has direct or indirect interest for a period of three years before or after his appointment, the statement added.

The Companies (Amendment) Bill, 2017, had been passed by the Lok Sabha in July last year during the monsoon session.

--IANS

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