Union Finance Minister Nirmala Sitharaman on Tuesday proposed amendments to the Insolvency and Bankruptcy Code (IBC) to improve loan recovery process, while also facilitating cross-border insolvency resolution.

Sitharaman, in her budget speech, did not detail the amendments planned but said necessary changes to the IBC will be carried out to enhance the resolution process.

The FM also proposed the speeding up of voluntary winding up of companies.

"Necessary amendments will be made in the IBC for more efficient dispute resolution and enable cross-border insolvency resolution," Sitharaman said in her budget speech.

Since the inception of the IBC, a total of 4708 Corporate Insolvency Resolution Process (CIRP) cases have commenced until September-end, 2021. As per the data provided by the Insolvency & Bankruptcy Board of India (IBBI), 421 of these companies have completed approvals of the resolution plan. 

One proposed amendment could include a code of conduct for the committee of creditors (CoC), which decides on insolvency resolution proposals.

“The ambiguities in the IBC on rights and priority of secured creditors as well as dissenting creditors need to be clarified. The resolution process is a bit prescriptive in certain situations such as limiting the number of amendments to the resolution plan. Changes or clarification in some of these areas will help make the IBC more effective,” said Aashit Shah, Partner, J Sagar Associates.

Once cross-border insolvency rules become operational as law, it will allow lenders to recover dues from defaulting borrowers disposing of foreign assets as well as promoters' personal assets that are parked in offshore locations.

The cross-border insolvency rules are expected to be framed on the lines of United Nations Commission on International Trade Law (Uncitral).