No fresh insolvency to be initiated for 1 year under IBC: Nirmala Sitharaman
New Delhi, May 17: 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.
Also, coronavirus-related debt will be excluded from definition of default, she said.
Sitharaman said,"No fresh insolvency proceeding will be initiated up to 1 year. At the moment MCA has extended this by 6 months, we intend to extend this by another 6 months. For MSMEs a special insolvency framework will be notified under section 240-A of IBC. The minimum threshold to initiate insolvency proceedings raised to Rs 1 crore from the earlier Rs 1 lakh, which largely insulates MSMEs."
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.
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.
Seven compoundable offences under the Companies Act altogether dropped and five to be dealt with under alternative framework, the finance minister said.
Also, the government allowed companies to directly list securities in permissible foreign jurisdictions. Private companies, which list non-convertible debentures on stock exchanges, would not to be regarded as listed companies, she added.