A special scheme for debt-ridden MSMEs will be introduced

New delhi date. Saturday 22 August 2020

The special insolvency system for micro, small and medium enterprises (MSMEs) is likely to allow the borrower (debtor) to retain the company's rights until the resolution process is completed. However, the final decision on all these important matters will be taken by the committee of creditors, said the Bankruptcy Board of India.

Sahu, chairman of the bankruptcy board, said that in the current system, a company has to go from a promoter to an interim solution professional and then to a solution professional and then become a solution applicant. This exercise poses many hurdles to the small company in business.

There will be no need to change the law with this new exercise. This will have effect under the provisions of Section 240A of the IBC. In this section, MSMAE is exempt from a number of bye-laws under Section 29A that protect the promoter of pin-performing assets participating in the resolution scheme. It may be noted here that the Finance Minister had earlier announced that a special mechanism would be introduced for compelled MSMEs as part of the Kovid relief package.

The government is also considering amending the Insolvency and Lending Disability Code to introduce a plan already prepared for all companies under pressure. The committee is considering creating a mechanism for the plan already prepared and will submit its report by the end of this month.

The law has to be strengthened keeping in view the reality of the market. Currently, the closure of the company means the end of many people's livelihood. Not being able to liquidate a non-viable company was a mistake that could be corrected in the next quarter.