NEW DELHI: India will soon have a modern law to deal with sick companies, which become insolvent due to genuine reasons. The move, first announced by finance minister Arun Jaitley in Budget 2014, is aimed at modernising the countrys archaic bankruptcy rules, and will enable easier exit for companies that have failed because of various reasons, including unforeseen developments such as a global financial crisis.
On Wednesday, a government panel released the first draft of a proposed bankruptcy law modelled on the USAs tested Chapter 11 bankruptcy code, which handholds insolvent companies and aids banks that would have lent to such companies.
The Bankruptcy Law Committee, headed by former law secretary TK Vishwnathan, proposes a 180-day timeline for dealing with applications for resolving insolvency, besides early identification of financial stress in companies which could help in their revival. The new norms would allow easy exits for companies while protecting the rights and interest of lenders.
The report has also suggested that an insolvency resolution plan prepared by a resolution professional has to be approved by 75% of financial creditors. Agencies
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