INSOLVENCY RULE EASED FOR SMEs

A bill which is replacing an ordinance thus amending the insolvency and bankruptcy code extends the Small and Medium Enterprises (SMEs), which are undergoing insolvency proceedings, one month window to repay their overdue loans.  Also,

1. The Insolvency and Bankruptcy Code Amendment Bill 2017 allows some breath to promoters by interpreting the definition of ONE YEAR OF NON PERFORMING ASSETS, which prevents them from bidding for their companies.
2. Further, the Code also eliminates asset reconstruction companies, alternative investment funds and banks from the definition of CONNECTED PERSONS.
3. This protects these personnel from not being eligible for participation in the bidding process. Also, the bill has twisted the ordinance language, which bars promoters of persons in the management or control of companies with more than a year of NPAs from bidding.
4. Further, the bill recommends a 30 day grace period for promoters who had bid for the companies undergoing insolvency proceedings, before the ordinance was promulgated, ie. on November 23, 2017 and were barred.

It may be noted that promoters of SMEs had bid for their companies, prior to the ordinance was brought out.

Note:

• The Insolvency and bankruptcy code is a one stop solution for resolving insolvencies which at present is a long process and does not offer an economically viable arrangement.
• A strong insolvency framework where the cost, time, incurred is minimised in attaining liquidation has been long overdue in India.
• The code will be able to protect the interests of small investors and make the process of doing business a cumbersome-less process.