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Puneet Dhawan of Accor is brimming with ideas on ways to revive the hospitality sector
Finance Minister Nirmala Sitharaman (File photo) - PTI
You may have to wait for some more time before a comprehensive cross-border insolvency framework becomes a reality in India, as the Centre has not included it in the Insolvency and Bankruptcy Code (second amendment) Bill 2019.
Finance Minister Nirmala Sitharaman introduced the Bill in the lower house on Thursday.
The government feels that on the cross border insolvency issue further debate and discussions are needed between policy makers and the regulator IBBI.
Also read: How the Union Cabinet’s move to strengthen IBC is a game changer
Meanwhile, the Centre has in the Bill brought in a new threshold for allowing home buyers and certain category of financial creditors for initiating corporate insolvency resolution plan (CIRP). It has been stipulated that at least 100 home buyers or 10 per cent of home buyers in a project, whichever is lower, are required for moving an insolvency petition against real estate developer. The Bill has also accorded highest priority for repayment of last mile funding to corporate debtors to prevent their insolvency, in case the company goes into corporate insolvency resolution process or liquidation.
Commenting on the Bill, Uday Bhansali, President-Financial Advisory, Deloitte India, said that he was not disappointed that cross border insolvency framework did not make it to the Bill. He, however, expressed confidence that this reform will become a reality in the coming days.
Bhansali said that the proposal in the Bill that criminal cases of the previous promoter do not apply to the successful bidder is a significant one. So is the proposal that permissions and licences will continue even after the IBC process.
“This will avoid the need to reapply for licences and permissions and save the successful resolution applicant a lot of management time and overhead,” he said.
L Viswanathan, Partner, Cyril Amarchand Mangaldas, a law firm said that the IBC Amendment Bill contemplates providing priority in repayment to last mile funding.
“Debts that would be eligible for this priority are to be notified. Such debt will have priority of payment in both resolution and liquidation processes under the Insolvency and Bankruptcy Code. Once the Bill is approved and the necessary notifications are in place, such notified last mile funding will stand on an equal footing with funding provided, and costs incurred by creditors, during the insolvency process,” he said.
This is expected to incentivise the provision of last mile funding to companies to prevent their insolvency, whilst at the same time provide such creditors a fall back protection of priority of payment should the company become insolvent. This will help companies that need last mile funding to access a wider pool of capital that caters to this requirement and should also enable such funding on competitive terms since it has priority in IBC, Viswanathan said.
Puneet Dhawan of Accor is brimming with ideas on ways to revive the hospitality sector
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