Prime Minister Shri Narendra Modi announced Rs 20 lakh crore fiscal stimulus equivalent to 10 per cent of India’s GDP to deal with COVID-19 situation in the country, the Union Finance Minister Nirmala Sitharaman announced the following changes in the Insolvency Bankruptcy Code (“IBC”) sector to promote the motto of Self Reliant India and boost the economic status of the Country.
Changes in Insolvency and Bankruptcy Code (IBC)
- Increase of minimum threshold to initiate Insolvency and Bankruptcy Code (IBC) proceedings to INR 1 crore – To insulate enterprises, particularly MSMEs, the minimum threshold for initiating insolvency proceedings, which was previously INR 1 Lakh, has been increased to INR 1 crore.
- Fresh IBC proceedings to be suspended for up to 1 year – The government has also announced to suspend fresh initiation of insolvency proceedings for 1 (one) year.
- Special insolvency resolution framework for MSMEs under Section 240A of the Code to be notified soon.
- Debts related to the coronavirus pandemic will not be included within the ambit of “default” under IBC. This means that all debt incurred by companies during the Covid-19 will not be considered as default and hence, no insolvency proceedings shall lie against such companies. MCA will be issuing a special circular to define the timeline within which such “Covid-19 related debt” is to be excluded from the default.