CODE RED

The new insolvency law puts creditors in charge

The code proposes a shift from the existing ‘debtor in possession’ to a ‘creditor in control’ regime

It aims to consolidate all existing insolvency related laws as well as to amend several pieces of existing legislation, including the Companies Act

The new code overrides all other laws relating to insolvency/ bankruptcy

It aims to resolve insolvencies quickly— the evaluation and viability determination must be completed within 180 days

Moratorium period of 180 days (extendable to 270 days) for the defaulting company. Insolvency professionals to take over interim management

A clearly defined ‘order of priority’ imposed, also called the ‘waterfall mechanism’

The waterfall mechanism renders the resolution of government dues less important than most others

Antecedent transactions can be investigated, and in the case of any illegal diversion of assets, personal contributions can be ordered by the courts

The code introduces qualified insolvency professionals as intermediaries to oversee the process

It establishes an independent board for the administration and governance of insolvency and bankruptcy laws