Government Forms Panel to Frame Bankruptcy Code

New Delhi: The government has set up a committee to frame bankruptcy law to enable entrepreneurs to close down unviable businesses.

The committee under former law secretary T K Vishwanathan will study the corporate bankruptcy legal framework in India and submit a report by February next year, the Finance Ministry said in a statement.

Finance Minster Arun Jaitley in 2014-15 Budget had announced that an entrepreneur-friendly legal bankruptcy framework would be developed for SMEs to enable easy exit.

The committee will examine the whole gamut of issues relating to bankruptcy, including specific areas like why bankruptcy matters besides early detection and resolution of financial distress.

It would also look into protection of interest of stakeholders and would study the rescue mechanism and suggest ways of improving it, besides liquidation procedure for smaller companies.

In its meeting in August, the sub-committee of the Financial Stability and Development Council (FSDC) had called for taking early steps by financial sector regulators for a vibrant, deep and liquid corporate bond market:

"A group headed by a former Law Secretary would examine all the existing laws and a single Bankruptcy Code would be put in place as an effective Bankruptcy Code is critical in developing a sound corporate bond market," an RBI statement said on Monday.