In a significant judgment dated 9 June 2020 titled ‘Indus Biotech Private Limited v.

Introduction

Background

Ever since the Hon’ble Finance Minister of India announced the suspension of initiation of corporate insolvency under the Insolvency and Bankruptcy Code 2016 (IBC) in wake of the COVID-19 pandemic, there have been several market speculations about the nature and extent of the proposed suspension and its implications. With the promulgation of the amendment ordinance to IBC, most of these speculations have been put to rest, however owing to the language of the Ordinance, a new set of issues may have arisen.

Introduction

Introduction

It has been more than a month since the announcement of the lock-down in India by the Central Government, and longer in many other parts of the world.

Due to the Covid-19 pandemic, consolidation transactions are likely to increase in India and globally as many businesses may not have the financial wherewithal to survive the crisis and will look to sell out. At the same time, there will be buyers (“Buyer”) who may have enough cash to be deployed in taking over distressed businesses. This article discusses some of the issues which the Buyer should keep in mind while buying distressed assets.

The Government of India (GOI) announced a nationwide lock down on account of Covid-19 pandemic with effect from 25 March 2020. This has severely disrupted regular business activities across all sectors of the economy in the country. The quarterly newsletter issued by the Insolvency and Bankruptcy Board of India (IBBI) for the quarter October – December 2019, states that as on 31 December 2019, there are approximately 1,961 entities which were undergoing a corporate insolvency resolution process (CIRP) under the Insolvency and Bankruptcy Code, 2016 (Code).

Less than three weeks after the Intervention Measures to Mitigate the Effects of the COVID-19 Infectious Disease Epidemic on Citizens and the Economy Act (Zakon o interventnih ukrepih za zajezitev epidemije COVID-19 in omilitev njenih posledic za državljane in gospodarstvo; the “Intervention Act”) came into force, new amendments are on their way.

Slimming down a company, corporate and financial restructuring will be on minds of many managers and company owners in the coming months.

In practice, when deciding to wind down a company, often a decision needs to be made whether to trigger a regular wind-down (likvidacija), a fast-track wind-down (prenehanje družbe po skrajšanem postopku) or a bankruptcy proceeding (stečaj). The main goal usually is to close down the company with less cost and no liability for the shareholder or the management.

1. What to address first