Insolvency and Bankruptcy Code 2016

In 2016, at a time when India’s Non-Performing Assets and debt defaults were piling up, and older loan recovery mechanisms such as the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act (SARFAESI), Lok Adalats, and Debt Recovery Tribunals were seen to be performing badly, the Insolvency and Bankruptcy Code (IBC) code was introduced to overhaul the corporate distress resolution regime in India and consolidate previously available laws to create a time-bound mechanism with a creditor-in-control model as opposed to the debtor-in-possession system.

• Covers all individuals, companies, Limited Liability Partnerships (LLPs) and partnership firms.
• Adjudicating authority:
  • National Company Law Tribunal (NCLT) for companies and LLPs
  • Debt Recovery Tribunal (DRT) for individuals and partnership firms
• Establishment of an Insolvency and Bankruptcy Board of India to exercise regulatory oversight over insolvency professionals, insolvency professional agencies and information utilities.

Process of IBC

• When a corporate debtor (CD), or a company which has taken loans to run its business, defaults on its loan repayment, either the creditor (a bank or an entity that has lent money for operational purposes) or the debtor can apply for the initiation of a Corporate Insolvency Resolution Process (CIRP) under Section 6 of the IBC.
  • Earlier, the minimum amount of default after which the creditor or debtor could apply for insolvency was ₹1 lakh, but considering the stress on companies amid the pandemic, the government increase the minimum amount to ₹1 crore.
• To apply for insolvency, one has to approach a stipulated adjudicating authority (AA) under the IBC— the various benches of the National Company Law Tribunal (NCLT) across India are the designated AAs.
  • The Tribunal has 14 days to admit or reject the application or has to provide a reason if the admission is delayed.
  • The amended mandatory deadline for the completion of the resolution process is 330 days.
• Once the application is admitted, the AA appoints an interim resolution professional (IRP), registered with an insolvency professional agency (IPA).
  • IRPs could be experienced and registered chartered accountants, company secretaries, lawyers and so on.
• Once appointed by the Tribunal, the IRP takes control of the defaulter’s assets and operations, collects information about the state of the company from Information Utilities (repositories keeping track of the debtor’s credit history), and finally coordinates the constitution of a Committee of Creditors or a CoC.
• A CoC, comprising all (unrelated) financial creditors of a defaulting company, is the most important business decision-making body in every CIRP, as it decides whether the defaulting company is viable enough to be restructured and given a fresh start, or liquidated.
  • It also appoints an insolvency professional (IP), who can either be the same as the IRP or a new professional, who looks after the operations of the company during the CIRP.
• The IP invites and examines proposals for a resolution plan for a company, which could include restructuring of debt, merger or demerger of the company. It submits eligible plans to the CoC, which can approve a plan if it receives 66% of the voting share of committee members. If the CoC fails to approve any resolution plan, the company goes for liquidation.
• If a plan is approved, the CoC submits it to the Tribunal (before the maximum 330-day deadline), which then approves the plan which the debtor is bound to implement. The AA can also reject a plan.

 

IBC was amended to introduce pre-packs or pre-pack insolvency resolution process (PIRP) for Micro, Small, and Medium Enterprises (MSMEs). Under a pre-pack resolution, creditors and owners of a business agree out-of-court to sell the business to an interested buyer. The buyer may be a third party or someone related to the business. The current law limits the pre-pack resolution mechanism to defaults not exceeding Rs. 1 crore

 

 

World Health Assembly

Recently, the 76th annual World Health Assembly was held at World Health Organization (WHO) Headquarters(HQ), Geneva, Switzerland. The theme for 2023 is “WHO at 75: Saving lives, driving health for all.”

About WHA

• The World Health Assembly (WHA) is the forum through which the World Health Organization (WHO) is governed by its 194 member states. It is the world’s highest health policy setting body and is composed of health ministers from member states.
• The members of the WHA generally meet every year in May in Geneva at the Palace of Nations, the location of WHO Headquarters.
• The main tasks of the WHA are to decide major policy questions, as well as to approve the WHO work programme and budget and elect its Director-General (every fifth year) and annually to elect ten members to renew part of its executive board.
• The WHA is also responsible for the endorsement of the WHO Family of International Classifications, a series of internationally standardized medical classifications, including the International Classification of Diseases (ICD) and the International Classification of Functioning, Disability and Health (ICF).

 

Pandemic Treaty

• Negotiations on new rules for dealing with pandemics are underway at the WHA.
• The WHO already has binding rules known as the International Health Regulations – adopted in 2005 after the SARS outbreak.
• These regulations are still considered appropriate for regional epidemics, such as Ebola but inadequate for a global pandemic.

 

Proposed Pandemic treaty

• It should be a legally binding treaty (proposed by the EU and to be adopted by May 2024) for those who sign up.
• It would be only the second such health accord after the 2003 Framework Convention on Tobacco Control – a treaty that aims to reduce smoking via taxation and rules on labelling and advertising.
• Developing countries, especially in Africa, are keen to use the negotiations to secure better access to vaccines.
• However, the proposed treaty has come under fire as critics warn that it could lead to countries ceding authority to the WHO.