Clean slate for new investors in amended bankruptcy bill

The move is aimed at speeding up corporate turnarounds and reducing legal uncertainty

- Gireesh Chandra Prasad

New investors in bankrupt companies will be spared the baggage of unpaid dues under a proposed amendment to India's insolvency law, a move aimed at speeding up corporate turnarounds and reducing legal uncertainty.

The amendment seeks to give buyers of distressed assets a clean slate by extinguishing all claims by creditors against a bankrupt company once an insolvency resolution plan is approved, said two persons aware of discussions in the government. This covers claims not specifically provided for in the resolution plan.

A specific provision to this effect has been included in the proposed Insolvency and Bankruptcy Code (Amendment) Bill that's currently before Parliament, they said, speaking on condition of anonymity.

This, however, will not affect recovery of dues from promoters, managerial personnel, or guarantors in certain questionable or voidable transactions executed prior to debt resolution.