Insolvency and bankruptcy code (amendment) ordinance 2020 notified
June 5, 2020
The President has promulgated the Insolvency and Bankruptcy Code (Amendment) Ordinance 2020 with effect from 5 June 2020.
The Amendment Ordinance provides the suspension of the initiation of the corporate insolvency resolution process under a new Section 10A, which provides that, notwithstanding the provisions of sections 7, 9 and 10 of the Code, no application shall be filed against a corporate debtor for any default arising on or after 25 March 2020 for a period of six months or a further period not exceeding one year from such date, as may be notified. The proviso to this section clarifies that no application shall ever be filed for any default occurring during this period. However, any default occurring prior to 25 March 2020 will not be given this relaxation.
The Ordinance also provides for the protection of a director or partner of the corporate debtor from any order of the Adjudicating Authority, made upon an application by the RP under sub-section (2) of section 66, directing that the director or partner shall be liable to make such contribution to the assets of the corporate debtor, if – (a) before the insolvency commencement date, such director or partner knew or ought to have known that the there was no reasonable prospect of avoiding the commencement of a corporate insolvency resolution process in respect of such corporate debtor; and (b) such director or partner did not exercise due diligence in minimising the potential loss to the creditors of the corporate debtor). A new sub-section (3) to section 66 provides that the RP shall not file an application under sub-section (2) in respect of such default against which initiation of corporate insolvency resolution process is suspended under section 10A.
To refer to the gazette notification of the Insolvency and Bankruptcy Code (Amendment) Ordinance 2020, click here.
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