The Resolving Insolvency indicator evaluates:
Show answer & explanation
Correct answer: C
Explanation
Correct Answer:
Time, cost, and recovery rate in bankruptcy cases
Explanation:
The Resolving Insolvency indicator (featured in assessments like the World Bank's Ease of Doing Business framework) evaluates the efficiency and effectiveness of a country's legal and regulatory mechanisms in handling corporate financial distress and bankruptcy. Specifically, it measures the time taken, expenses incurred, and the overall recovery rate for creditors during insolvency proceedings.
Key Points:
Time Component: Measures the duration in calendar years from the point of a company's default until creditors receive their final payment.
Cost Component: Quantifies total administrative, legal, and court expenses as a percentage of the debtor's estate value.
Recovery Rate: Evaluates how many cents on the dollar secured creditors manage to recover through reorganization, liquidation, or debt enforcement proceedings.
Important Questions and Answers:
Question: What additional index is used alongside time, cost, and recovery rate to evaluate a country's insolvency framework?
Answer: The Strength of Insolvency Framework Index, which checks if local laws follow international good practices.
Question: Which major code streamlined corporate insolvency resolution and significantly impacted India's performance metrics in this domain?
Answer: The Insolvency and Bankruptcy Code (IBC), 2016.