President promulgates amendment to insolvency and bankruptcy law

The Insolvency and Bankruptcy Code (Amendment) Ordinance, 2017, dated 23 November 2017, was promulgated by President RN Kovind to amend the provisions relating to the insolvency resolution process contained in the Insolvency and Bankruptcy Code, 2016. The ordinance has made several amendments in order to bring clarity to the resolution process under the code. Some of the key changes are:

Applicability of the code. The ordinance has expanded the applicability of the code to include personal guarantors who have provided a guarantee for a borrowing by a corporate borrower, which was hitherto an uncertain position. The ordinance makes the code applicable to proprietorship firms, which could potentially bring several small and medium enterprises within the ambit of the code.

Invitation to submit resolution plans. Prior to the ordinance, any person could submit a resolution plan to the resolution professional (i.e. the professional appointed to oversee and conduct the corporate insolvency resolution process) and become a resolution applicant, making suggestions as to the manner in which insolvency resolution of a particular company could take place. However, the ordinance has made it mandatory for a resolution professional to first invite prospective resolution applicants (who satisfy the requisite criteria and conditions) to submit resolution plan(s). Only those persons who meet the eligibility criteria, and who are invited to submit resolution plans by the resolution professional, may do so under the code.