What India’s New Bankruptcy Law Means
What Is India’s New Bankruptcy Code?
India currently has multiple laws to deal with insolvency, which leads to significant delays in winding up a company. The Bankruptcy Code will consolidate the existing framework and create a new institutional structure.
The new law will also likely create a new class of insolvency professionals who will help sick companies and banks with a smooth takeover of the insolvent company and manage the liquidation process.
The bill also proposes the setting up of a new entity, the Insolvency and Bankruptcy Board of India, which will regulate insolvency professionals and information companies — those which will store all the credit information of corporates.
The Bankruptcy Code proposes two authorities to deal with insolvency. The National Company Law Tribunal will adjudicate cases for companies and limited liability partnerships, while the Debt Recovery Tribunal will do the same for individual and partnership firms.
How Will a Company Be Liquidated?
An insolvency resolution plan has to be approved by 75% of voting-share creditors. Once the plan is approved, it would also require the sanction of the adjudicating authority.
During the insolvency resolution period, the management of the debtor is placed in the hands of an resolution professional.
The code proposes to protect the workers in case of insolvency, paying their salaries for up to 24 months will get first priority during the liquidation of assets.
“The code comes as a relief to workers and employees who are left unpaid by defaulting companies,” said Varun Gupta, partner at KPMG in India.
In the event of an insolvent debtor having assets abroad, India’s federal government can enter into an agreement with an overseas country to ensure enforcement of the law.
How Much Time Will the Law Save?
Currently, it takes an average of 4.3 years to resolve insolvency in India and the recovery rate of debt is very low compared with other countries, according to a report from Nomura. India also ranks 136 in the World Bank’s resolving insolvency ranking. This is below China, which ranks 55 and where it takes 1.7 years to resolve insolvency.
The new law introduces a time limit on the bankruptcy process. In the case of a default, the time-limit is 180 days, within which the resolution has to be completed. This can be extended by another 90 days by the adjudicator, depending on the process.
Analysts say the new time frame will help India improve its World Bank insolvency ranking.
How Useful is the New Law?
The new bankruptcy law isn’t a “magic wand,” says brokerage Religare Capital Markets. It sees the benefits flowing in after 3-5 years from now.
Analysts say the main challenge will be creating a large pool of insolvency professionals who will help with the fast implementation of the law. The new regulators will also need to draft procedural rules for insolvency professionals and information utilities among others.
Modi didn’t go after Sonia or Chidu or the Congress on their corruption and stealing of national wealth. He has no clue about how the economy will change. Today globalism has reversed to anti-globalism. This has shrunk the market for which he was preparing. BRICS bank was stillborn. Indian workers and even those intelligentia whose labor is sold in foreign markets are going to return in great numbers adding to the pressure of unemployment while the foreign exchangr they were repatriating will come to zero. Even when Trump is ready to fight Islamic Terrorism Modi is lukewarm to his proposal. He follows the same policies of appeasement to Muslims and Christians and encouraging and prolierating casteism that the Congress govts have followed before. Today the UPA & the Congress are literally dead. So in 2019 who will be his enemy? What will be his election slogan? Not the corruption that Swamy fought vehemently and which he milked to the last drop in 2014 election and then backstabbed him. If he employed ‘India Shining’ it will once again be disastrous. The Kashmiri Pandits were again pushed into their tents. Sundanda case is hidden under the carpet because it may bring out that Sonia killed her and AJ had a share in it. He managed to have a puppet CJI so the Mandir Issue will be postponed. Even the Disproportionate Income of JJ wont be heard even after her death because he depends of the AIADMK votes in parliament so the crooks and free.
Modi is no Napoleon but a cunning coward. He is a narcissist who is a wolf in sheep’s clothe. His demonetization is to save his rich friends who defaulted their bank loans to the tune of lacs of crores. He wont publish their names. He wont confirm that more money than was printed was returned. He wants people to keep their money in the bank and he will charge them when they withdraw it and impose limit on how much they can withdraw their own money. He has built a following of bhakts who would defend him but the fact is his majority was coming out of only 31% of the electorate and if 3% stayed home in the next election his MPs score will drop to less than 50. It is his own making. He creates his own enemies and he cannot defend his nation even though he makes a posture. I know what is going on in India. India cannot survive if China-Pak ties are not broken and Modi wont do it. He is afraid of taking on the Muslims while they are growing by leaps and bounds and are becoming one of the greatest menace as we see in Kerala and WB. He is not even prepared to acknowledge they are a problem. So these things constitute whether he loses his election or whether he loses his life like Indira and Rajiv. Time will tell.
Secretary of State Rex Tillerson’s job running the State Department just got considerably more difficult. The entire senior level of management officials resigned Wednesday, part of an ongoing mass exodus of senior Foreign Service officers who don’t want to stick around for the Trump era.
Tillerson was actually inside the State Department’s headquarters in Foggy Bottom on Wednesday, taking meetings and getting the lay of the land. I reported Wednesday morning that the Trump team was narrowing its searchfor his No. 2, and that it was looking to replace the State Department’s long-serving undersecretary for management, Patrick Kennedy. Kennedy, who has been in that job for nine years, was actively involved in the transition and was angling to keep that job under Tillerson, three State Department officials told me.
Then suddenly on Wednesday afternoon, Kennedy and three of his top officials resigned unexpectedly, four State Department officials confirmed. Assistant Secretary of State for Administration Joyce Anne Barr, Assistant Secretary of State for Consular Affairs Michele Bond and Ambassador Gentry O. Smith, director of the Office of Foreign Missions, followed him out the door. All are career Foreign Service officers who have served under both Republican and Democratic administrations.
Kennedy will retire from the Foreign Service at the end of the month, officials said. The other officials could be given assignments elsewhere in the Foreign Service.
In addition, Assistant Secretary of State for Diplomatic Security Gregory Starr retired Jan. 20, and the director of the Bureau of Overseas Building Operations, Lydia Muniz, departed the same day. That amounts to a near-complete housecleaning of all the senior officials that deal with managing the State Department, its overseas posts and its people.
“It’s the single biggest simultaneous departure of institutional memory that anyone can remember, and that’s incredibly difficult to replicate,” said David Wade, who served as State Department chief of staff under Secretary of State John Kerry. “Department expertise in security, management, administrative and consular positions in particular are very difficult to replicate and particularly difficult to find in the private sector.”
Several senior Foreign Service officers in the State Department’s regional bureaus have also left their posts or resigned since the election. But the emptying of leadership in the management bureaus is more disruptive because those offices need to be led by people who know the department and have experience running its complicated bureaucracies. There’s no easy way to replace that via the private sector, said Wade.
“Diplomatic security, consular affairs, there’s just not a corollary that exists outside the department, and you can least afford a learning curve in these areas where issues can quickly become matters of life and death,” he said. “The muscle memory is critical. These retirements are a big loss. They leave a void. These are very difficult people to replace.”
Whether Kennedy left on his own volition or was pushed out by the incoming Trump team is a matter of dispute inside the department. Just days before he resigned, Kennedy was taking on more responsibility inside the department and working closely with the transition. His departure was a surprise to other State Department officials who were working with him.
One senior State Department official who responded to my requests for comment said that all the officials had previously submitted their letters of resignation, as was required for all positions that are appointed by the president and that require confirmation by the Senate, known as PAS positions.
“No officer accepts a PAS position with the expectation that it is unlimited. And all officers understand that the President may choose to replace them at any time,” this official said. “These officers have served admirably and well. Their departure offers a moment to consider their accomplishments and thank them for their service. These are the patterns and rhythms of the career service.”
Ambassador Richard Boucher, who served as State Department spokesman for Colin Powell and Condoleezza Rice, said that while there’s always a lot of turnover around the time a new administration takes office, traditionally senior officials work with the new team to see who should stay on in their roles and what other jobs might be available. But that’s not what happened this time.
The officials who manage the building and thousands of overseas diplomatic posts are charged with taking care of Americans overseas and protecting U.S. diplomats risking their lives abroad. The career Foreign Service officers are crucial to those functions as well as to implementing the new president’s agenda, whatever it may be, Boucher said.
“You don’t run foreign policy by making statements, you run it with thousands of people working to implement programs every day,” Boucher said. “To undercut that is to undercut the institution.”
By itself, the sudden departure of the State Department’s entire senior management team is disruptive enough. But in the context of a president who railed against the U.S. foreign policy establishment during his campaign and secretary of state with no government experience, the vacancies are much more concerning.
Tillerson’s job No. 1 must be to find qualified and experienced career officials to manage the State Department’s vital offices. His second job should be to reach out to and reassure a State Department workforce that is panicked about what the Trump administration means for them.