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‘No re-entry for ex-promoters in bankrupt firms’
The amendments in the IBBI regulations will prevent backdoor entry of former promoters in companies under liquidation by covering the “loopholes” in the law and are in line with the objective of the Insolvency and Bankruptcy Code (IBC), experts said.
The Insolvency and Bankruptcy Board of India (IBBI) has amended the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 and the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016. Under the amendments introduced to liquidation regulations, persons who were ineligible are now barred from being part of any compromise or arrangement at the stage of liquidation. Furthermore, a secured creditor who chooses to sell secured assets independently also cannot sell the same to a person who is ineligible under the IBC.
“This has been introduced to overrule the decisions passed by some NCLTs, whereby it was held that no bar operated on the sale of secured assets to the ex-promoters of the Corporate Debtor, if such sale is carried out by a secured creditor under Section 52 of the IBC,” said Punit Dutt Tyagi, Executive Partner, Lakshmikumaran and Sridharan Attorneys.
Rachit Sharma, DGM, Taxmann said the new amendment to IBC norms restricts secured creditors from selling or transferring assets of a liquidating - company to any person who is not eligible to submit an insolvency resolution plan.