IBC And MSME Insolvency

Since the majority of MSMEs facing insolvency are more likely to liquidate and not go into reorganization/restructuring (by virtue of their size), frameworks should not only focus on reorganization/ restructuring, but also on expeditious liquidation mechanisms

- Sumant Batra

The government is in the process of finalizing regulations for fast-track resolution under the Insolvency and Bankruptcy Code 2016 (IBC). The draft regulations placed in the public domain propose that the fast-track process of insolvency resolution under IBC comprising 90 days will be available to small companies with paid-up capital not exceeding INR 50 lakh or such higher amount as may be prescribed not exceeding INR 5 crore; or with turnover not exceeding INR 2 crore or such higher amount as may be prescribed but not exceeding INR 20 crore. A holding company or a subsidiary company will not be able to avail the benefits of the fast-track process. The benefits of fast-track will also be available to start-ups up to five years from the date of incorporation if their turnover does not exceed INR 20 crore in any financial year, and they are working towards innovation, development, deployment or commercialization of new products, processes or services driven by technology or intellectual property.