In its year-end review, the Ministry of Corporate Affairs (MCA) on Sunday highlighted the various steps it undertook in 2019 for ease of doing business and creating a robust insolvency framework. "In pursuance to objective of providing greater 'ease of doing business' to all stakeholders, bring about greater transparency in corporate structure and fostering better corporate compliance so as to enhance the efficiency of the processes under Companies Act, 2013, the Ministry of Corporate Affairs (MCA) has taken several landmark initiatives/decisions during last one year (January-November 2019)," said an official statement.
It noted that India has improved its ranking on the World Bank's 'Doing Business 2020' report. As per the report, India has moved up 14 positions to 63rd position from 77th position in 2018.
Among other steps for easing the business environment, the government introduced the 'Integrated Incorporation Form—Simplified Proforma for Incorporating Company Electronically' (SPICe) which extends eight services from three ministries through a single form. Technical and procedural violations were de-criminalised under Companies Act which reduced the burden on criminal courts and the National Company Law Tribunal (NCLT).
The Competition Commission of India (CCI) introduced an automatic system of approval for combinations under 'Green Channel'. Under this process, the combination is deemed to have been approved upon filing the notice in the prescribed format. This system would significantly reduce time and cost of transactions, the MCA statement said.
The government also modified the provisions relating to issue of shares with Differential Voting Rights (DVRs) with the objective of enabling promoters of Indian companies to retain control of their companies in their pursuit for growth and creation of long-term value for shareholders, even as they raise equity capital from global investors.
Earlier this month the ministry launched an 'independent director's databank' to provide an easy to access and navigate platform for the registration of existing independent directors as well as individuals aspiring to become independent directors.
The ministry further mentioned the steps taken for improving the insolvency resolution mechanism and said that as per the latest 'Resolving Insolvency Index', India's ranking jumped 56 places to 52 in 2019 from 108 in 2018.
It said that the recovery rate increased from 26.5 per cent in 2018 to 71.6 per cent in 2019 and time taken in recovery improved from 4.3 years in 2018 to 1.6 years in 2019.
The latest and the most significant development in the IBC came last week, when the government introduced the Insolvency and Bankruptcy Code (Second Amendment) Bill, 2019 in the Lok Sabha on Thursday.
Among others changes, after the amendment, home buyers, willing to take the developer to an insolvency court, will now have to ensure that a minimum of 100 home buyers or 10 per cent of the total home buyers file for bankruptcy against the developer. Among other amendments, it also provides for the protection of buyers from criminal proceedings against previous promoters of the bankrupt firm.
The Parliament also passed the the Insolvency and Bankruptcy Code (Amendment) Bill, 2019 which came into effect from August 16, 2019. This amendment Bill provides for the timely conclusion of cases, greater flexibility for corporate restructuring for maximizing value of assets, protecting primacy of secured creditors and removing voting deadlock of homebuyers among others.
Further, the Insolvency and Bankruptcy (Insolvency and Liquidation Proceedings of Financial Service Providers and Application to Adjudicating Authority) Rules, 2019 were issued on November 15, 2019 which provide a generic framework for insolvency and liquidation proceedings of financial service providers (FSPs) other than banks.
Notification of clause (e) of section 2 of IBC was issued on November 15 and enforced from December 1, which extends the scope of the IBC by bringing the resolution and bankruptcy of personal guarantors of corporate debtors under IBC.
As per the ministry, out of 21,136 applications filed, 9,653 cases involving a total amount of around Rs 374,931.30 crore have been disposed off at pre-admission stage of IBC.
Around 2,838 cases were admitted into Corporate Insolvency Resolution Process (CIRP), out of which 306 cases are closed by appeal or review, or were withdrawn.In the 161 resolved cases, the realisable amount is Rs 1,56,814 crore, as per the statement.