Proposed changes to the insolvency regime will boost credit markets and entrepreneurship, argues Debanshu Mukherjee
The Insolvency and Bankruptcy Code, 2015, which was introduced in parliament in December 2015, proposes large-scale reforms to India’s corporate insolvency regime. If implemented in its present form, the code will significantly impact the promotion of credit markets and entrepreneurship.
The Sick Industrial Companies Act, 1985 (SICA), is currently the only law that deals with resolving insolvency. However, it applies only to industrial companies and excludes a large number of businesses. The trigger event for initiation of proceedings under SICA is based on a test of erosion of net worth, which does not facilitate timely resolution of the problem.