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bankruptcy restructuring in india

Insolvency Regime in India. Concept of

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bankruptcy restructuring in india

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    1. Bankruptcy Restructuring in India 29 November 1999 KISHORE SONI Chief Executive SONI INDUSTRIAL RESTRUCTURING CONSULTANTS NEW DELHI

    2. Insolvency Regime in India Concept of �industrial sickness� Sickness worse than Bankruptcy- defined based on net worth and not by debt default Sick Industrial Companies (Special Provisions) Act, 1985 - SICA Board for Industrial & Financial Reconstruction (BIFR)

    4. SICA definition -- its problems Either SICA catches it too late�

    5. SICA definition -- its problems BIFR either identifies extremely sick firms or mistakenly declares non-sick companies as sick Asymmetry between lender and borrower -- at the expense of lender Lender: NPA after 180-days default Borrower: NPA after net worth ? 0

    6. BIFR delays: Jan 97 to Mar 98

    7. Pending cases at BIFR

    8. Where does BIFR stand? Objective: bad managers, like bad currency to be kept out of circulation Facts speak otherwise Total cases disposed 1229 Mergers 94 (8%) Change in management 39 (3%)

    9. Where does BIFR stand? Automatic suspension of all legal proceedings Average delay: > 3 years More than 18% got illegitimate stay till the case got rejected Debtor in possession

    10. APR violations� then and now

    11. Agenda for Reforms Early detection Speed Voluntary references Facilitation and quick arbitration

    12. Towards a new SICA Definition to be altered to debt default Onus on company Time bound negotiations If negotiation fails, referred to BIFR Appointment of administrator by BIFR Invitation for a two-part bid Creditors vote on the bids

    13. An alternative

    14. A Caveat Indian law requires liquidation by courts which confirm the Hindu belief that there is life after death

    15. Reform or Perish... No. of references to BIFR shooting up since 1996

    16. Reform or Perish... Bank credit in sick industries increased by 14% to Rs157 billion as on March 1998 NPAs at Rs586 billion as on March 1999 This massive gap demonstrates urgency for quick reforms of bankruptcy laws

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