The government is soon expected to put in place a framework for insolvency resolution in case of personal guarantors to corporate debtors, and take up the issue of debt resolution in case of proprietorship and partnerships in the second phase.
As the Insolvency and Bankruptcy Board of India (IBBI) has already finalised the norms for individual bankruptcy resolution in case of personal guarantors, the government is expected to notify these within a month, sources familiar with the matter said. Under the Insolvency and Bankruptcy Code (IBC), a corporate debtor or a financial creditor can take listed and unlisted companies to the National Company Law Tribunal (NCLT) for initiating a time-bound corporate insolvency resolution process (CIRP).
However, no such framework is currently available in the case of personal guarantors to companies, partnership firms and individuals.
“Under the new framework, individuals have been divided into three categories: personal guarantors, proprietors and the third is common individuals. The government is ready with norms for personal guarantors for corporate debtors and expects these to be notified soon,” sources said, adding that the Ministry of Corporate Affairs is in final stages of approving the framework.
IBBI Chairperson M S Sahoo said: “We are working on rules and regulations for insolvency resolution and bankruptcy of personal guarantors to corporate debtors. Learning from the experience, we would draft rules and regulations for insolvency resolution and bankruptcy of proprietorship and partnership firms. Thereafter, we will work on a framework for other individuals.”