Saturday, May 7, 2016

The Insolvency and Bankruptcy Code at a glance

Lok Sabha has passed the Insolvency and Bankruptcy Code 2016 on May 05, 2016. It covers individuals, companies, limited liability partnerships and partnership firms. The new code will speed up the resolution process for stressed assets in the country. It attempts to simplify the process of insolvency and bankruptcy proceedings. The highlights of bankruptcy code are enumerated hereunder:

1. Strict deadlines : Authority to decide insolvency applications within 180 days further, an extension of additional 90 days can be allowed

2. Fast track Insolvency process: Fast track process is available for Corporate- Debtor with low income and assets, Specified class of creditors and any other category notified by Govt. Under fast track process, 90 days time-limit to complete whole process and further an extension of 45 days is allowed

3. Adjudicating Authority:

NCLT for Corporates

DRTs for Individuals and Partnerships Firms

NCLAT to act as Appellate Authority

4. Insolvency Regulator: To exercise regulatory authority over insolvency professionals, insolvency professional agencies and informational utilities

RBI revisits ECB provisions for infra-sector

The basic objective of the extant External Commercial Borrowings (ECB) policy is to supplement domestic capital for creation of capital assets in the country, limited by considerations for capital account management. The earlier ECB policy1 had gone through thorough revamping during the month of November, 20152 (Framework, 2015) based on the recommendations made by the Sahoo Committee, under the chairmanship of M.S Sahoo, in February, 20153. This framework brought in a host of changes in the ECB framework.
Salient features of Framework, 2015 are as under:-

Inclusion of financial lease as a forms of borrowings

Relaxing rules for NBFCs but restricting it to INR denominated borrowings

Segmenting the Minimum Average Maturity (MAM) in three tracks - Track I, Track II, Track III

A more liberal approach, with fewer restrictions on end uses, higher all-in-cost ceiling, etc. for long term foreign currency borrowings as the extended term makes repayments more sustainable and also minimizes roll-over risks for the borrower;

A more liberal regime for INR denominated ECBs where the currency risk is borne by the lender;

Expansion of the list of overseas lenders to include long-term lenders, such as, Insurance Companies, Pension Funds, Sovereign Wealth Funds;

Only a small negative list of end-use restrictions applicable in case of long-term ECB ( Track II) and INR denominated ECB ( Track III);