Essential to capture both quantifiable and nonquantifiable outcomes of IBC: IBBI Working Group Report

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The working group on Tracking Outcomes of Insolvency and Bankruptcy Code, 2016 (IBC) constituted on May 24, 2019, submitted its report to the Insolvency and Bankruptcy Board of India (IBBI) on November 10.

The working group suggests that it is essential to capture both quantifiable and nonquantifiable outcomes of the code. Analysis of both qualitative and quantitative parameters can be undertaken at different points in time- ex-ante, interim and ex-post efficiency, it said in the report.

The working group also lays out the objective of the code. According to the report,  the first order objective of the Code is resolution, the second order objective is maximisation of value of assets of the firm and the third order objectives are promoting entrepreneurship, availability of credit and balancing the interests of stakeholders.

This order of objectives is sacrosanct, it said.

The  working group suggests a framework to track outcomes of the code by identifying quantitative and qualitative parameters, institutional arrangements for capturing the parameters and manner of using the identified parameters.

The identified parameters will be applied to the six foundational objectives of the code, viz., resolution of stress, maximisation of value of assets, promoting entrepreneurship, enhancing the availability of credit, balancing of interests of all stakeholders and establishing an ecosystem to serve as a framework for tracking outcomes.

Further the working group identifies six layers of outcome, viz.,

•  Growth, strength and efficiency of the insolvency ecosystem,
•  Strength, efficiency, and efficacy of the processes, namely, corporate insolvency resolution,
• Growth and efficiency of markets such as markets for interim finance, resolution plans, liquidation assets, etc.
•  Impact on businesses in terms of cost of capital, capital structure, availability of credit, etc.
•  Behavioural changes amongst the debtors and creditors, trust of the creditors in debtors, meritocratic lending, etc.
•  Overall impact on employment, income, and economic growth of the nation.