Highlights of the Ordinance
The Ordinance amends the Insolvency and Bankruptcy Code, 2016 to prohibit certain people from submitting a resolution plan (specifying details of restructuring a defaulter’s debt). These persons include: (i) wilful defaulters, (ii) disqualified directors, (iii) promoters or management of the defaulting company, and (iv) any person who has committed these activities abroad.
The Ordinance bars an insolvency professional from selling the property of a defaulter to any such person during liquidation.
Key Issues and Analysis
The Ordinance prohibits certain persons from submitting resolution plans as it may be considered undesirable to let them take charge of the company. However, this may reduce competition among applicants seeking to resolve the company and result in lower recoveries for creditors.