The government decides to suspend Insolvency and Bankruptcy Code (IBC) for one year
The purpose of enacting the Insolvency and Bankruptcy Code (IBC) is to create a single law for Insolvency and Bankruptcy proceedings. IBC aims at providing one-stop solution for resolving insolvency issues, which earlier used to take a long time and was also not economically viable.
However, in view of the present crisis emerging on account of COVID-19, when the business models of the companies are badly hit and the demands for products are at all-time low due to lockdown situation, the companies are facing financial challenges and may not be able to meet their financial and debt servicing obligations in time. Also, it may not be possible for the companies to come forward with resolution plans or actions thereon during the crisis time.
Therefore, in view of the above, the Government has decided to suspend the operation of Insolvency and Bankruptcy Code (IBC) for one year. Further, to boost the MSME sector Government has also increased the minimum threshold limit to Rs. 1 crore from the present Rs. 1 lakh for the MSME sector.To understand it means that if a default in debt repayment from an MSME reached Rs. 1 crore and above, then only it can be taken to insolvency and bankruptcy proceedings.
