Analysis of the Capital Structure in the Context of Bankruptcy Law Practices in India

Abstract

The Insolvency and the Bankruptcy Code 2016 lays down new methods for the liquidation of the firm. It intends to decrease the bankruptcy costs. But it is not effective to prevent the build-up of future bad debts. Also, it is combining the aspect of the Debtor oriented procedures as well as the Creditor oriented procedures. The Article 29 A ensures the exclusion of the participation of the persons with criminal and dubious background in the resolution proceedings. This may also help to attract more foreign capital and may decrease the cost of the capital. It will also help firms to be more flexible in raising debts for their investment options. But this weakens the going concern concept of the firms as it does not offer an existence after bankruptcy. The bankruptcy laws in USA are more extensive and suitable to reduce the direct costs related to the bankruptcy. There is no significant difference in the Debt to Equity ratios of the bankrupt companies in India and USA So it cannot be considered as the indicator of bankruptcy.