Budget 2020: Stressed Asset Buyers May Get Sops As India Weighs Bankruptcy Law Revamp – Exclusive

The government is planning a revamp of the insolvency process to make the mechanism simpler and attractive for buyers of stressed assets, according to a senior official.It’s considering tax concessions for such buyers, the official said on the condition of anonymity as details aren’t public yet. Some of the concessions being considered are waiver of stamp duty, registration fees, past customs dues and GST imposed on sale of some assets, the official said.The Insolvency and Bankruptcy Board of India is working on the proposals and Finance Minister Nirmala Sitharaman is expected to announce some of these concessions in the Union Budget 2020-21 to be tabled on Feb. 1, he said.According to Insolvency and Bankruptcy Code, all creditors, including tax authorities, have to submit their claims to a resolution professional once a company is admitted for insolvency. If the plan doesn’t include tax claims, the authorities challenge it at the National Company Law Tribunal. And if their claims are dismissed by the NCLT, they can challenge the tribunal’s order.The government is working on guidelines for tax authorities so that they don’t challenge the resolution plan approved by the NCLT, the person cited earlier said.A framework is also under discussion to prevent the tax authorities from coming up with a pervasive interpretation of the law that leads to a high tax liability for the buyer of a stressed asset, he said.Besides, the government wants a clear policy for its departments to file claims for companies under IBC, the person said, adding that tax authorities may be given directions to stop filing adverse claims after a transaction is completed. The government intends to protect new buyers from such claims, the official said.There’s a lack of clarity on whether a bidder is entitled to pay tax dues, and each NCLT takes its own view while deciding on such matters, according to Babu Sivaprakasam, a partner at Economic Laws Practice. Framing a suitable policy and guidelines to government departments and agencies for filing timely claims when a company goes into insolvency will help the resolution process, he said..More Information To BiddersThe government has recognised that access to information for potential buyers is a problem, the official said, adding it’s looking to bring in more transparency to provide information about stressed assets and their liabilities to bidders.Foreign bidders, in particular, don’t have adequate information about these assets and have to hire a domestic company for due diligence, he said.An earlier proposal to have a dedicated portal for information on stressed assets has, however, been delayed, the official said.Collation of information on stressed assets followed by a vendor due diligence in key areas such as financial, tax, legal, technical and liabilities can potentially help save time in the insolvency process, Sanjeev Krishan, partner at PwC India, told BloombergQuint. This could hasten the process after the expression of interest, he said.The government, in December, approved amendments to the insolvency code to ring-fence new buyers of stressed assets from criminal proceedings against offences committed by previous management or promoters. The Ministry of Corporate Affairs is also considering relief from investigation by enforcement agencies, the official said.Emailed queries to a spokesperson of the Ministry of Finance and Corporate affairs didn’t elicit a response.Also Read: Proposed IBC Amendments Address JSW Steel’s Bhushan Power ProblemThe government is also designing a system for parallel, out-of-NCLT settlements as there’s no binding policy in cases where no buyers come forward. A mechanism is being considered for resolution of firms with bank exposure of less than Rs 1,500 crore where the Reserve Bank of India doesn’t mandate inter-creditor agreement between lenders.

Budget 2020: Stressed Asset Buyers May Get Sops As India Weighs Bankruptcy Law Revamp – Exclusive

The government is working on guidelines for tax authorities so that they don’t challenge a resolution plan approved by the NCLT.

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