The impact of bankruptcy laws on Merger and Acquisitions

The introduction of Insolvency and Bankruptcy Code in 2016 led to a new way forward for the Indian financial and legal framework. What earlier was a patchwork of redundant laws has now given way to a solid, structured code.

The perennial problem of bad debts and growing list of creditors was a huge hindrance for banks and financial bodies. The relief has come in the form of the IBC code, giving a new lease of financial security to lenders and also providing an impetus to potential investors. The impact of the code can also be seen on an integral business practice – merger and acquisitions.

Under the code, a resolution process needs to take place within 180 days (with a 90 day extension), this has prompted for faster resolutions and has also sparked a spur of M&A deals. This trend has been apparent especially in the steel, power, construction and cement sectors. As banks push for an overhaul in the management of loan defaulting companies, time bound resolutions have drastically helped in setting a precedent for future transactions

Further the companies Act  1956 Only inbound mergers were permitted  whereas the  companies Act ,2013  aslo enable outbound mergers ;the provision of which were notified  in 2017.In this respect and in an effort to ease the process,The Reserve Bank of India issued the Foreign  Exchange Management (Cross Border Merger)Regulations in March, 2018 The Process made way for more defined and solid Framework to encourage cross-border mergers 

  In a scenario where the environment is favourable for new mergers and acquisitions, it’s the correct time for promoters with adequate capital and a stable business plan to bid for distressed assets. In this regard, BSP Freedo provides a conducive platform for sellers to engage with prospective buyers. Transparency and accountability, the two founding pillars of a business deal are a pre-condition for any transaction through the platform and in light of continuous policy changes, our team strives to achieve the most favourable results from all deals. If you’d like to know more about mergers and acquisitions or have any other business query, you can write to us at support@bspfreedo.com

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