Economy > Government policies
08 April 2021
The President on Sunday promulgated the Insolvency and Bankruptcy Code (Amendment) Ordinance, 2021, giving effect to the cabinet approval for amendments in the Insolvency and Bankruptcy Code, 2016 (Code), through an ordinance.
The amendments aim to provide an efficient alternative insolvency resolution framework for corporate persons classified as micro, small and medium enterprises (MSMEs) under the Code, for ensuring quicker, cost-effective and value maximising outcomes for all the stakeholders, in a manner which is least disruptive to the continuity of MSMEs’ businesses and which preserves jobs.
The initiative is based on a trust model and the amendments honour the honest MSME owners by trying to ensure that the resolution happens and the company remains with them.
President Kovind promulgates Insolvency and Bankruptcy Code (Amendment) Ordinance, 2021 ANI | Updated: Apr 07, 2021 19:51 IST
New Delhi [India], April 7 (ANI): PresidentRam Nath Kovind promulgated the Insolvency and Bankruptcy Code (Amendment) Ordinance, 2021 on Sunday, a statement issued by the Ministry of Corporate Affairs informed on Wednesday.
According to the statement, the cabinet had approved the proposal to make amendments in the Insolvency and Bankruptcy Code, 2016 (Code), through the Insolvency and Bankruptcy Code (Amendment) Ordinance, 2021 on March 31. The amendments aims to provide an efficient alternative insolvency resolution framework for corporate persons classified as micro, small and medium enterprises (MSMEs) under the Code, for ensuring quicker, cost-effective and value maximising outcomes for all the stakeholders, in a manner which is least disruptive to the continuity of MSMEs businesses and which preserves jobs. The
Summary
One of the key drivers of economic recovery in India will be the efficient movement of capital from inefficient firms to efficient ones. The economic downturn caused by the coronavirus pandemic has been severe, and India’s economy was one of the worst affected in 2020–2021. Though the economy is recovering faster than initial estimates, sustained economic recovery will not take place if stressed businesses cannot restructure their debts properly or if failing firms cannot be resolved efficiently. India’s bankruptcy law is key to solving these challenges.
In 2016 India enacted the Insolvency and Bankruptcy Code, 2016 (IBC), which was a landmark reform to the nation’s financial system and the first comprehensive law to regulate insolvency.
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1. Introduction
Covid-19 related stress severely impacted all aspects of the
Indian economy including the nascent insolvency regime under the
Insolvency and Bankruptcy Code, 2016
(
Code ). The financial stability report
(
FSR ) of December 2020 released by the
Reserve Bank of India (
RBI ) predicts a
sharp rise in the gross non-performing assets of banks by September
2021
1. The FSR predicts uncertainty in the economic
recovery path although it assures that the worst is behind.
Needless to say, economic recovery is impossible without resolution
of bad debts and especially Covid-19 defaults. Consequently, the
report of sub-committee of Insolvency Law Committee on the
pre-packaged insolvency resolution process (