The Supreme Court’s decision upholding legal provisions related to personal guarantors under the Insolvency and Bankruptcy Code (IBC) could open the flood gates to action against them. So far, as many as 150 of the applications filed against personal guarantors have reportedly been rejected, while 282 were admitted. After the top court’s order, this ratio will likely see a far sharper skew in favour of case admissions.

Lenders would be pleased. It gives them recourse to an otherwise slippery source for the recovery of dues. Even in cases where settlements have already been reached, lenders could pursue personal guarantors to make good the portion of debt left unpaid. Promoters, typically the ones who provide these personal guarantees, would be displeased, now that a line which may have limited their liability appears to have blurred.

But then, offering a guarantee is a voluntary act, and to that extent amounts to a surrender of the “limited company" principle that only the capital staked in a business can be seized, not other personal holdings. Guarantors may start backing away now. If a rash of corporate credit re-ratings follows, then something was amiss all along.

Milestone Alert!
Livemint tops charts as the fastest growing news website in the world

QOSHE - The SC’s IBC ruling pleases lenders, displeases promoters - Livemint
menu_open
Columnists Actual . Favourites . Archive
We use cookies to provide some features and experiences in QOSHE

More information  .  Close
Aa Aa Aa
- A +

The SC’s IBC ruling pleases lenders, displeases promoters

8 0
14.11.2023

The Supreme Court’s decision upholding legal provisions related to personal guarantors under the Insolvency and Bankruptcy Code (IBC) could open the flood gates to action against them. So far, as many as 150 of the applications filed against personal guarantors have reportedly been rejected, while 282 were admitted. After........

© Livemint


Get it on Google Play