IBC UPDATE

No fresh insolvency to be initiated for 1 year under IBC: FM Sitharaman

In a bid to give relief to companies defaulting on loans due to the Covid-19 stress, Finance Minister Nirmala Sitharaman on Sunday said no fresh insolvency will be initiated for one year under the Insolvency and Bankruptcy Code.

Highlights of the Announcement:

• coronavirus-related debt will be excluded from definition of default, she said.
• Minimum threshold to initiative insolvency proceeding has been raised to Rs 1 crore from Rs 1 lakh to benefit MSMEs, she said adding that an Ordinance will be promulgated to bring this change in IBC.
• Majority of the compoundable offences sections will be shifted to internal adjudication mechanism (IAM), she said adding that amendments will be brought through an Ordinance and will de-clog the criminal courts and NCLT.
• Seven compoundable offences under the Companies Act altogether dropped and five to be dealt with under alternative framework, the finance minister said.
• Private companies, which list non-convertible debentures on stock exchanges, would not to be regarded as listed companies, she added.

She also announced decriminalisation of the Companies Act in violations involving minor technical and procedural defaults including shortcoming in CSR reporting, inadequacies in board report, filing defaults and delay in holding AGM.Also, the government allowed companies to directly list securities in permissible foreign jurisdictions.