NEW DELHI: The ministry of corporate affairs (MCA) has chalked out a plan for the first 100 days of the new government to assume office after the elections.
Besides a clutch of changes to the Insolvency and Bankruptcy Code (IBC) aimed at expediting the resolutions and expanding the ambit of the mechanism, the action plan includes streamlining of the existing rules under the Companies Act, 2013 and bolstering the National Company Law Tribunal (NCLT).
“The MCA will engage in increasing the number of members at NCLT beyond the current sanctioned strength. Besides, the proposal by the industry to create separate benches for IBC (insolvency and bankruptcy code), and company law-related matters within the NCLT will also be taken up,” said an official source.
The official said that plan also covers finalising a stricter governance framework for large unlisted firms, especially in the backdrop of alleged irregularities at firms like Byju’s.
At present, NCLT has 53 members, including judicial and technical members, as against the sanctioned strength of 63 members. “It’s expected that the member strength could be increased in proportion to the number of registered companies. The proposal to increase the NCLAT strength is also part of the plan. The added members would give more time for NCLT to deal in matters related to Companies Act,” said the official. As per MCA data 1.67 million companies are registered in the country as on February 2024.
As per the action plan, the MCA will fast-track the process of amendments to IBC under the new government. “It’s top priority for the ministry. Though there have been several amendments in IBC already, there’s a need to speed up the resolution process further,” said the official.
“There’s an urgent need for amendments related to real estate projects, reverse insolvency, group insolvency, treatment of EPFO claims, and priority of claims of government authorities in terms of Rainbow Papers judgment of the Supreme Court,” said G.P. Madaan, adjunct faculty at government-run Indian Institute of Corporate Affairs (IICA).
As on September 2023, there was a backlog of over 13,000 cases stuck at various stages of IBC resolution with the average resolution time of 653 days versus the stipulated 330 days, as per a CRISIL report.
“The governance framework at unlisted firms which have systemic implications will be tackled on an urgent basis. The ministry is preparing a proposal to mandate unlisted firms to set up risk management committee (RMC) in addition to the existing committees that they are required to form. This will help mitigate the risks to a large extent,” said the official.
Certain proposals related to the Companies Act 2013 amendments will be taken up in the first few days, including allowing the companies to hold AGMs/EGMs through electronic mode, and to ease the requirement of raising capital in distressed companies. “For the past three years, companies have been holding their AGMs virtually. MCA has allowed this by way of circulars which have been extended on yearly basis. This is not part of the regulations right now and require amendments in the Act,” said Pavan Vijay, founder, Corporate Professionals.
The IBC amendments on the cards include introduction of cross-border and group insolvency mechanisms. The amendment also include removal of the interim moratorium provision for personal guarantors assets, introduction of project-wise insolvency under real-estate, and introduction of creditor-led resolution plan (CLRP) mechanism, a method to settle cases out-of-court.
Source: The Financial Express
