Partial sale of companies won't be default under insolvency code: Report

The government could allow the partial sale of a stressed company under the bankruptcy law only if it fails to attract a rescue plan for itself in its entirety, The Economic Times reported.

The proposed move is intended to reduce delay in resolution under the Insolvency and Bankruptcy Code (IBC) and ward off the erosion of stressed asset value.

Partial sale of insolvent firms would not be a default option, the report said.

Priority would be given to getting a single resolution plan for the entire firm in the first instance, and if that attempt fails to take off, multiple plans for different assets can be sought, the source added.

The Ministry of Corporate Affairs proposed revisions to the IBC which would allow several resolution plans for different parts of an insolvent company to increase value realisation.

The current rules state that the resolution plan for the entire insolvent firm is allowed, without which the firm goes for liquidation.

An enabling clause is needed to facilitate transactions under the IBC, when the debtor doesn't get any resolution plan for the entire firm.

It will help prevent liquidation and preserve jobs, the source said.

The proposed changes could enable investors with limited financial strength to bid for the assets of a stressed firm.

The proposals will be part of the new amendments to the IBC.