The committee’s recommendation comes at a time when number of listed companies have been undergoing corporate insolvency resolution process under the IBC
The 14-member committee reviewing the Insolvency and Bankruptcy Code (IBC) is not in favour of imposing trading ban on the companies that are undergoing bankruptcy and insolvency proceedings.
“The committee was clear that suspension or prohibition of trading of securities is a power utilised by the Securities and Exchange Board of India (Sebi) and stock exchanges. Thus, the intent of the code was not to suspend or prohibit such trading during Corporate Insolvency Resolution Process (CIRP), and such trading may in fact result in better price discovery and continuation of the entity as a going concern,” as per the panel report.
The committee’s recommendation comes at a time when number of listed companies have been undergoing corporate insolvency resolution process under the IBC.
Section 28 of the IBC is being interpreted by the resolution professionals to suggest that trading curbs could be imposed on the trading in shares of the companies undergoing CIRP. Prior approval of the Committee of Creditors is required to dispose of or permit the disposal of shares of any shareholder of the corporate debtor or their nominees to the third parties, as per IBC.
Meanwhile, Securities and Exchange Board of india (Sebi) is looking at whether it is desirable to impose any trading restrictions on such companies. Sebi is going to release a discussion paper that will examine whether there should be trading restrictions on such firms.
“Buyers are placing bids on a company as they see the prospects of resolving insolvency. In any case, it is going to be sold as a going concern if the resolution process fails,” said Sanjay Gupta, president of the Institute of Cost Accountants of India.
The report came in the public domain on Tuesday.
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