Individual insolvency misuse by personal guarantors in govt cross hairs

Draft IBC amendments propose to remove 'perverse incentives'

Ruchika Chitravanshi New Delhi

The moratorium under section 96 of IBC provides that upon the filing of an application

The Ministry of Corporate Affairs (MCA) has taken a strict view of the misuse of individual insolvency by some personal guarantors, proposing that they not be allowed any moratorium period when they file for insolvency, in the latest draft amendments to the Insolvency and Bankruptcy Code (IBC). 
The MCA has said that the move has been suggested to remove perverse incentives of applying for individual insolvency. There were concerns regarding the misuse of initiation of the individual insolvency resolution process by personal guarantors to take advantage of the interim moratorium, it said.
The moratorium under Section 96 of the IBC provides that upon the filing of an application, all legal actions or proceedings pending in respect of the debt concerned shall remain stayed, and creditors shall not initiate any legal action or proceeding in respect of such debt. 
To address fraudulent transactions by insol

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First Published: Jan 19 2023 | 8:41 PM IST

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