The Insolvency and Bankruptcy Code of 2016 legislation has been passed in the Lok Sabha. For startups, the proposed law should make it easy for investors to exit failed ventures. In case of companies with simple debt structures, the law should provide resolution within 90 days, as announced in the Startup India, Stand Up India event. The bill will now be taken up by the upper house. If approved by the Rajya Sabha, the law will ensure time-bound settlement of insolvency and enable faster turnaround of businesses. With the legislation, it would also create a data base of serial defaulters. Here's a lowdown of what the Insolvency and Bankruptcy bill is all about: 1. Whom does a business approach to declare insolvency? Chiefly, two organizations will adjudicate on behalf of corporate persons, firms and individuals. The mediation will be done by National Company Law Tribunal under Companies Act, 2013 (yet to be setup) and the Debt Recovery Tribunals (DRTs). The NCLT will adjudicate for companies and limited liability partnerships (LLP) while the DRTs will adjudicate cases for individuals and partnership firms. Other new entities and professionals to be set up under the legislation are: Insolvency and Bankruptcy Board of India Insolvency professionals (IPs) insolvency professional agencies (IPAs) The Insolvency and Bankruptcy Board of India will regulate IPAs who in turn will regulate the IPs. The IPs will be responsible for carrying out the resolution process and managing the company during insolvency resolution. Until the Insolvency and Bankruptcy Board is established, a financial sector regulator such as…
