In an internal communication dated October 30, the ministry said: “The Code’s adaptability to evolving business landscapes ensures that it remains dynamic and responsive, while its continuous refinement will be essential for effectively addressing future challenges in insolvency management and corporate restructuring”.
The communication to stakeholders comes ahead of the government’s plan to introduce a raft of amendments to the IBC in the winter session of Parliament, likely in December.
The government could introduce a creditor-led resolution framework and a group insolvency mechanism under the IBC, as part of the changes, ET has reported.
Since its rollout in 2016, the insolvency law has been tweaked half-a-dozen times, incorporating necessary changes to respond to emerging issues around the corporate bankruptcy resolution and to improve upon the initial architecture.
The law was last amended in August 2020 to introduce, among others, a compact and largely informal bankruptcy settlement process-known as the pre-packaged mechanism-to expedite the rescue of stressed micro, small and medium enterprises.‘Moratorium in IBC crucial’
The communication also highlights the importance of the IBC moratorium, a period when no judicial proceedings for recovery, sale or transfer of assets, or termination of essential contracts can be initiated or continued against the bankrupt company. The moratorium, the ministry said, plays “a crucial role in balancing the protection of businesses in financial distress with the interests of creditors, regulators, and other stakeholders”.
“By halting legal actions and preserving assets, it supports genuine efforts at recovery and negotiation,” it added.
The government has so far tweaked the moratorium rule twice. In June 2023, it exempted production and revenue-sharing contracts, exploration licences, and mining leases of insolvent petroleum firms from the moratorium requirement.