Changes in Companies Act to make insolvency process effective: Govt
NEW DELHI: The government on Monday said amendments to the Companies Act 2013 will make the insolvency process more effective.
The government over the last few weeks has announced a number of changes to various laws to remove roadblocks to the insolvency process.
The Companies (Amendments) Act 2017, which received Parliament’s nod in the justconcluded winter session, have put restrictions on managerial remuneration when a company has defaulted in its dues.
Companies, which have defaulted on their dues to financial institutions, will need the prior approval of creditors, besides approval in a general meeting in case the payment of managerial remuneration exceeds 11% of the net profits.
Earlier, only the company’s prior approval in a general meeting was required.
The amendments have also allowed issuance of shares at a discount to the creditors in cases where debt is converted into shares in pursuance of a resolution plan under the Insolvency or Bankruptcy Code or a debt restructuring scheme.
The changes to the Act also bar a registered valuer from undertaking valuation of any asset in which he has direct or indirect interest for a period of three years before or after his appointment.
Last week, the income tax department said that rules around levy of minimum alternate tax (MAT) will be eased for insolvent companies.
The tax department said that companies against whom insolvency proceedings have been initiated will be allowed to reduce the entire amount of loss brought forward, including unabsorbed depreciation from the book profit for calculation of MAT. It added that legislative changes will be made to make this more effective.
The government has also formed a committee inviting comments for stakeholders till January 10 on how to make the insolvency code more effective.