Miles to go

Miles to go

Bankruptcy code

News:

1. The new Insolvency and Bankruptcy Code (IBC) witnessed a major success when Tata Steel acquired 73% stake in the bankrupt firm Bhushan Steel.

Important facts:

2. The proceeds from the acquisition will go towards settling almost two-thirds of the total outstanding liabilities that Bhushan Steel owes banks.
3. In future, if banks recover funds of such considerable scale, then:
4. It would considerably reduce the burden on taxpayers and
5. It would free valuable assets to be used for wealth-creation.
6. The challenges which remains for the bankruptcy resolution process are:
7. The proposed eligibility criteria for bidders,
8. Restriction of capacity in helping out creditors efficiently, and
9. Strict time limit for the resolution process.
10. The possible measures to be taken are:
11. A robust market for stressed assets that is free from all kinds of entry barriers is requird,
12. Recommendation of the Insolvency Law Committee for a relaxed bidder eligibility criteria should be implemented, and
13. Amendments to the bankruptcy code should primarily be driven by the goal of maximising the sale price of stressed assets.