President Ram Nath Kovind recently clears IBC code amendments, giving homebuyers the status of financial creditors, allowing owners of failed small businesses to win back their companies out of bankruptcy and lowering the votes needed for lenders to clear a corporate turnaround plan.
These amendments in IBC were based on the recommendations of an expert panel.
Injeti Srinivas, secretary at the ministry of corporate affairs (MCA), said that the amendments would help increase competition among potential investors for bankrupt assets. It is tried to ensure that corporate rescue plans are approved within 180 days, although the law allows a maximum of 270 days before letting unviable firms go into liquidation.
Road shows would be held in India and abroad for attracting investors to turn around bankrupt companies. As per the amendment, pure-play financial institutions such as asset reconstruction companies, alternative investment funds, foreign institutional investors and venture capital funds which may be related to companies classified as non-performing assets (NPAs) will not be barred from bidding for a bankrupt firm.
An MCA statement said that recognizing homebuyers as financial creditors will give them “significant relief” as it will give them representation on the panel of creditors and make them an integral part of decision-making. In case of delays in delivery of homes, homebuyers can drag builders to a bankruptcy tribunal.