Changes in insolvency law will help save viable businesses: FM, Pg10

Key Highlights:

• The Lok Sabha passed the Insolvency and Bankruptcy Code (Amendment) Bill, 2025 by voice vote on Monday.
• The Bill aims to provide a time-bound process for resolving insolvency among companies and individuals.
• The amendment includes 12 changes, with 11 based on the Select Committee's recommendations.
• The Bill empowers the committee of creditors (CoC) to appoint or remove the liquidator and supervise the liquidation process.

Detailed Insights:

• The Insolvency and Bankruptcy Code (IBC), 2016 was designed to save viable businesses, not just recover debt.
• The Amendment Bill seeks to address procedural delays that have plagued the IBC process.
• A Creditor-Initiated Insolvency Resolution Process (CIIRP) will allow select financial institutions to initiate insolvency proceedings out-of-court.
• The Bill removes the liquidator's power to admit or reject claims, transferring this authority to the CoC.
• Public sector banks have seen improved profitability due to reforms, with NPAs reduced to 2.3%.
• Concerns were raised regarding the Bill's ability to prevent economic offenders from fleeing the country and the need for MSME protection.

Key Concepts Involved:

• Insolvency: A state of financial distress where an entity cannot meet its financial obligations.
• Liquidation: The process of converting assets into cash to pay off debts.
• Committee of Creditors (CoC): A body of financial creditors who make key decisions during the insolvency resolution process.