With a huge unsatiated appetite for freedom of exit, the insolvency law is changing the way society perceives business failures and striving to build confidence among creditors, Competition Commission of India chief Ashok Kumar Gupta said on Saturday.

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He also emphasised that suiting the new economic milieu, the Insolvency and Bankruptcy Code (IBC) project exit as a resolvable fall-out of market competition and provides a rather graceful exit for entrepreneurs.

He was delivering the annual day lecture of the Insolvency and Bankruptcy Board of India (IBBI), a key institution in implementing the Code.

"Fuelled by a huge unsatiated appetite for freedom of exit, the insolvency law is changing the way society perceives business failures, as it becomes a reform by, for and of stakeholders.

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"Standing on the two critical pillars of transparency and credibility, the Code and its implementation have continuously strived to build confidence among the creditors and the new management through an efficient bidding process," Gupta said.

IBC came into force in 2016 and provides for a market-linked and time-bound resolution of stressed assets.

On the issue of haircuts taken by creditors during the resolution process, the CCI Chairperson said it should be viewed in the light of the fact that the Code provides a market-driven mechanism to stakeholders for reorganisation, and the resolution plan is approved by the Committee of Creditors in their commercial wisdom.

"The extent of the haircut may reflect the degree of discount the market demands. It is a function of the stage of stress at which the company comes to IBC... it is incumbent upon the stakeholders to avail of the tool that the IBC offers in the early days of stress, before the value deteriorates significantly, and not as a last resort, after exhausting all alternative avenues," he said.

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Gupta noted that the Code and IBBI will continue to play a critical role in giving young risk-takers the comfort of rapid, simple, and seamless resolution or exit in case of honest business failures.

"A professional and institutionalised mechanism of exit reduces the emotional cost and stigma that has been traditionally attached to business failures and insolvency. Suiting the new economic milieu, IBC projects exit as a resolvable fall-out of market competition and provides a rather graceful exit for entrepreneurs," he added.

CCI works to ensure that entry is not unduly restricted owing to strategic barriers created by large incumbents and that they can compete on merits in the marketplace.

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