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The Insolvency and Bankruptcy Code enacted by the government recently is likely to improve ‘ease of doing business’ rankings and provide a safe exit for businesses that have failed.
MS Sahoo, Chairman of the Insolvency and Bankruptcy Board of India, said earlier there were murmurs of the authorities not moving fast enough, but now the authorities are perceived to be moving too fast.
Within 13 months of the first report on bankruptcy code was submitted, the Insolvency and Bankruptcy Code has been implemented, he said addressing national seminar on Insolvency and Bankruptcy Code 2016.
The new law is intended to make the debt market as vibrant as equity markets with sufficient liquidity and better risk management. This will not only improve ease of doing business rankings but also promote entrepreneurship and release more money for development work, he said.
The time-bound resolution to insolvency will result in lower default, better recovery and make finance available at a lower cost for riskier projects besides giving better quality of services, he said.
The role of authorities in the Code is limited to administrative work. If the insolvency profession comes out with a workable plan then the lawyers of both the creditors and promoters can take a call to chalk out the modalities within 180 days.
“I think these kind of time limits are really scary. Even in stock market we were scared to do T+2 and rolling settlement but it has become the way of life now,” he said.
Mamta Binani, President, Institute of Company Secretaries of India, said in five years the new Code has the potential to unlock ₹25,000 crore of capital locked in dispute at various levels.
The ICSI has received registration to act as Insolvency Professionals Agency and has already registered about 40 professionals among the total 90 who are registered as insolvency professionals under the Code, so far. The first online exam for Insolvency Professionals will be held on December 31 in 100 locations.
Binani said insolvency professionals agency will be the front line regulator for professionals and lays down standards of the professional conduct besides monitoring their conduct.
To start with, she said about 94,000 cases registered with the erstwhile BIFR will be registered with the Insolvency and Bankruptcy Board of India. The expectations are that it will take another two years for the entire Code to improve the rankings in ease of doing business rating.
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