IBC helps personal guarantors resolve financial stress: MCA
personal guarantors seeking to resolve their financial difficulties", the Ministry of Corporate Affairs (MCA) said in a communication to stakeholders.
Personal guarantors give lenders an assurance of the repayment of loans taken by corporate debtors. Usually, these individuals are promoters or directors of the companies concerned or occupy key positions in them.
Earlier this week, the insolvency regulator floated a discussion paper seeking to make it difficult for personal guarantors of defaulting firms to escape liabilities.
The Insolvency and Bankruptcy Board of India (IBBI) proposed that the resolution plan submitted by an investor would not extinguish the creditors' right to proceed against loan guarantors and enforce the realisation of guarantees governed through various agreements. «The philosophy of guarantee in financial transactions is rooted in trust,» the MCA said.
«The building of this trust is essential in any lending transaction as it exposes creditors to various risks.» The ministry said the IBC regulations ensure that the rights and interests of personal guarantors are adequately protected during the insolvency proceedings of a stressed firm by providing them an opportunity to present their case, defend against claims and participate in the resolution process. It said various regulations of the IBBI «intend to foster active participation and cooperation among all stakeholders, thereby reinforcing a robust and equitable framework for addressing financial distress in PG (personal guarantor) cases».
Read more on economictimes.indiatimes.com
