Insolvency and Bankruptcy Code (Amendment) Bill, 2020
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In News: Parliament passed amendments to the insolvency law that will help safeguard successful bidders of insolvent companies from the risk of criminal proceedings for offences committed by previous promoters.
- The Insolvency and Bankruptcy Code (Amendment) Bill, 2020 was passed by voice vote in Rajya Sabha.
- It was approved by Lok Sabha on March 6.
- The latest changes pertain to various sections of the IBC as well as the introduction of a new section.
The Bill replaces an ordinance. The amendments are in sync with the time and also adhere to a Supreme Court order in “letter and spirit”. The Bill is set to replace an ordinance which had brought provisions of the Bill into effect on December 28 after it was referred to the Standing Committee on Finance, when it was first tabled in Lok Sabha.
- The bill seeks to remove bottlenecks and streamline the corporate insolvency resolution process.
- It aims to provide protection to new owners of a loan defaulter company against prosecution for misdeeds of previous owners.
The Insolvency and Bankruptcy Code (Amendment) Bill, 2020
- Requires of a minimum of 10 per cent of allottees or 100 individual allottees in a real estate project to initiate insolvency proceedings for real estate projects. As homebuyers are recognised as financial creditors under the IBC, individual homebuyers could initiate insolvency against a real estate company for delays in possession
- The latest changes pertain to various sections of the IBC as well as introduction of a new section. The IBC, which came into force in 2016, has already been amended three times.
The Bill intends
- To give the highest priority in repayment to last mile funding to corporate debtors to prevent insolvency, in case the company goes into corporate insolvency resolution process or liquidation
- To prevent potential abuse of the Code by certain classes of financial creditors,
- To provide immunity against prosecution of the corporate debtor and action against the property of the corporate debtor and the successful resolution applicant subject to fulfilment of certain conditions
- To fill the critical gaps in the corporate insolvency framework
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