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TMI BlogChallenges of IBC 2016X X X X Extracts X X X X X X X X Extracts X X X X ..... Challenges of IBC 2016 - By: - Ajay Singla - Other Topics - Dated:- 16-1-2019 - - Insolvency and Bankruptcy Code came to the financial sphere with a singular goal- to make sure that the earlier fragmented laws regarding insolvency and bankruptcy transform into a cohesive strand. It is 2018 and in retrospect, the new code has brought several amazing changes to the Indian economy- more foreign ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... investors are now interested in investing in Indian start-ups, and there are also other perks that can be listed as follows: The ability to resolve insolvency within a few days is amazing. More emphasis can be given to entrepreneurs that are likely to success rather than the almost always cases of failures. The availability of credit in the market is now maximize India jumped a lot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of ranks in the list of countries that are easy to do business with. However, there are some told and some untold challenges of this new code that are equally important and light is needed to be shed upon them. Challenges of IBC 2016 or to be appropriate of 2018 are the ones that are the primary motif of this blog and let us shed some light upon it. Challenges of transition As we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have already stated above, before the introduction of the code that was 24 years in the making, the rules and laws associated with insolvency were fragmented. With the introduction of the code, some of the following changes were way too sudden: Integrating all in a single regulatory body: This single regulatory body, the IBBI was to integrate all of the scattered fragments of governance un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der a single roof. What was not recognized in the initial stages of conversion is how scattered were those parts. Removal of some old laws: There were two laws The Presidency Hometown act and The Provisional Bankruptcy act. These laws that were integrated with the government from 1909 and 1920 respectively. These were so intertwined with the finances that some of the insolvency cases were to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be taken care for as well. With the removal of these laws, although these cases are back in circulation where they can be resolved fast, the results were not fully desirable. Challenges to acceptance Now, not everyone, especially an insolvent individual, welcomed the new code with open arms. The reason for that was ever lasting resolution period granted them a lot of time to sit around. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... With the introduction, all of these resolutions were to be swift and there is a general fear among insolvent individuals that there cases won t be held with care. Challenges of bias There are two types of creditors that can be involved with any type of insolvent debtor: Operational and financial creditors. For the financial creditors, the insolvency resolution process granted a proper wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y to get back the debt amount with time. However, for the operational creditors, who are supposed to be paid almost instantly, there is not a lot ways. Furthermore, within the voting pattern of the committee of creditors, there is also an issue where operational creditor s votes were not fully willing, they were forced. Challenges of Communication As a whole, the Insolvency and Bankruptcy ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Code indeed is the best achievement of the government, but financial analysts also say that these codes cannot be communicated to the rural regions. In almost all the aspects, they are right. Till now, more than INR 3 lakh crore have been recovered through this code. However, most insolvent companies are popular and ubiquitous ones. No one is talking about a small scale industry that is totally re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gion based. This presents a major challenge where the rural regions are not fully counted among them. Conclusion Although the Insolvency and Bankruptcy Code has brought the gift of fast resolution for the companies, there are still many challenged surrounding its transition, its acceptance, its bias and its communication! These challenges are repeatedly coming to surface and needs to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... taken care for. To that end, the Finance Ministry is coming with amendments to the code. While these amendments aren t perfect, they cover a lot of ground and they are still the best that we can hope for. - - Scholarly articles for knowledge sharing authors experts professionals Tax Management India - taxmanagementindia - taxmanagement - taxmanagementindia.com - TMI - TaxTMI - TMITax ..... X X X X Extracts X X X X X X X X Extracts X X X X
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