Incorporated entities, not single administrators, may soon be allowed to run bankrupt companies: Report

The rationale is that an experienced incorporated entity would have the expertise to smoothly run operations during the bankruptcy resolution period (Representative Image)

Incorporated entities will soon be allowed to manage bankrupt businesses, instead of a lender-appointed administrator, Mint reported. The proposal by the Insolvency and Bankruptcy Board of India (IBBI) will be released for public comments in 14 days, the paper quoted sources as saying.

The rationale is that an experienced incorporated entity would have the expertise to smoothly run operations during the bankruptcy resolution period, according to the report. This step is also expected to be helpful with solving complexities of running a large business, and with evolving companies as the distressed asset market in India matures, it added.

Moneycontrol could not independently verify the report.

“Running a company is not an easy task. An incorporated entity may have more resources and manpower to do that function,” the source told the paper. At present, an individual resolution professional, who has passed a qualifying exam, is appointed to run a bankrupt business which has undertaken resolution proceedings before a tribunal.

IBBI is also likely to release two proposals discussing how to improve the bankruptcy resolution process and on liquidation of distressed companies, the report said. These are aimed at making the liquidation process and turnaround time efficient through rules and administrative changes.

“IBBI has consulted bankers and judges before framing proposals in these discussion papers. Streamlining the procedures and enabling NCLT to take quick decisions are among the goals," the source told Mint.

A spokesperson for the Ministry of Corporate Affairs did not respond to queries, the report added.