Homebuyers to be treated as financial creditors now

President Ram Nath Kovind has given his assent to promulgate an ordinance amending the insolvency law.

Homebuyers will now be considered as financial creditors to real estate developers.
 
President Ram Nath Kovind has given his assent to promulgate an ordinance amending the insolvency law. 
 
The ordinance will also provide a special dispensation for small sector enterprises.
 
"This would give them due representation in the Committee of Creditors and make them an integral part of the decision making process," said Ministry of Corporate Affairs in a press note on Wednesday.
 
It also empowers the central government to allow further exemptions or modifications with respect to the MSME sector, if required, in public interest.
 
"The immediate benefit it provides is that, it does not disqualify the promoter to bid for his enterprise undergoing Corporate Insolvency Resolution Process (CIRP) provided he is not a willful defaulter and does not attract other disqualifications not related to default."  
 
Insolvency and Bankruptcy Board of India will frame the detailed mechanism of representation of the homebuyers on the committee of creditors.
 
With a view to encouraging resolution as opposed to liquidation, the voting threshold has been brought down to 66 per cent from 75 per cent for all major decisions such as approval of resolution plan, extension of Corporate Insolvency Resolution Process (CIRP) period, etc.  
"Further, in order to facilitate the corporate debtor to continue as a going concern during the CIRP, the voting threshold for routine decisions has been reduced to 51 per cent," the note said.
 
The ordinance provides for a minimum one-year grace period for the successful resolution applicant to fulfill various statutory obligations required under different laws.  
 
This would go a long way in enabling the new management to successfully implement the resolution plan, said the ministry.

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