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Cabinet approves ordinance for amendment to IBC
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SME Times News Bureau | 24 Dec, 2019
The Union Cabinet on Tuesday approved a proposal to promulgate an
ordinance for the amendment of the Insolvency and Bankruptcy Code (IBC).
The
proposed amendment would provide protection to buyers from criminal
proceedings against previous promoters of a bankrupt firm.
"Under
the amendments, the liability of a corporate debtor for an offence
committed prior to the commencement of the corporate insolvency
resolution process shall cease, and the corporate debtor shall not be
prosecuted for such an offence from the date the resolution plan has
been approved by the adjudicating authority," an official statement
said.
It further said that the liabilities would cease if the
resolution plan results in the change in the management of the corporate
debtor to a person who was not a promoter or in the management
previously.
It would also be applicable if the person is not
someone who the investigating authority finds to have conspired for the
offence.
"Subject to relevant provisions the corporate debtor
shall, as required, extend all assistance and co-operation to any
authority investigating an offence committed prior to the commencement
of the corporate insolvency resolution process," the statement said.
It
noted that the amendment would remove certain ambiguities in the
Insolvency and Bankruptcy Code, 2016, and ensure smooth implementation
of the code.
The government had on December 12 tabled a Bill in
the Lok Sabha to amend the code, which along with protection of new
buyers under IBC also sought to set a minimum requirement of the number
of homebuyers for filing an insolvency plea against a developer.
The
amendment would also pave the way for initiation of insolvency
proceedings against a real estate entity only if a class of creditors
approves it.
Also, the changes would protect the 'going concern
status' of a company facing insolvency proceedings while providing
protection to last-mile funding in financially distressed sectors.
According
to the Bill, homebuyers willing to take the developer to an insolvency
court will have to ensure that a minimum of 100 homebuyers or 10 per
cent of the total homebuyers file for bankruptcy against the developer.
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