FM provides Covid-19 relief, no fresh insolvency proceeding against MSMEs for 1 year

Delivering the fifth tranche of the financial package deal, a part of Atmanirbhar Bharat Abhiyaan, Finance Minister Nirmala Sitharaman introduced measures to reinforce Ease of Doing Business by way of IBC associated measures regarding MSMEs.
The authorities has raised the minimal threshold to provoke insolvency proceedings to Rs 1 crore from Rs 1 lakh, which largely insulates MSMEs. The Finance Minister added that the insolvency proceedings won’t be initiated as much as 1 year, recollecting that presently the MCA has prolonged it to 6 months.

The second necessary measure introduced is a particular insolvency decision framework underneath Section 240A of the IBC which will probably be notified quickly.

“This is a major step forward and in all probability will be going through an ordinance to achieve the goal immediately,” she stated.

The FM has just lately suspended Section 7, 9 and 10 of the Insolvency and Bankruptcy Code (IBC) for a interval of 6 months. However, the SME sector wished that IBC as a complete must be suspended for the stated six month time interval

Section 240A of IBC applies to micro, small and medium enterprises.

It states that however something on the contrary contained on this Code, the provisions of clauses (c) and (h) of part 29A shall not apply to the decision applicant in respect of company insolvency decision means of any micro, small and medium enterprises.

Subject to sub-section (1), the Central Government might, within the public curiosity, by notification, direct that any of the provisions of this Code shall—

(a) not apply to micro, small and medium enterprises; or

(b) apply to micro, small and medium enterprises, with such modifications as could also be specified within the notification.

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