The MSME Ministry posted on its twitter page about its notification on Framework for Revival and Rehabilitation of MSMEs which said that the existing mechanism for addressing revival, rehabilitation and exit of small enterprises is very weak in India.
“The Ministry of Micro, Small & Medium Enterprises has notified a Framework for Revival and Rehabilitation of MSMEs, in exercise of the powers conferred under section 9 of the Micro, Small and Medium Enterprises Development Act, 2006,” the Ministry wrote.
In India, the existing mechanism for addressing revival, rehabilitation and exit of small enterprises is very weak.
It notes that resolving insolvency takes 4.3 years on average and costs 9.0 per cent of the debtor’s estate, with the most likely outcome being that the company will be sold as piecemeal sale.
Pending a detailed revision of the legal framework for resolving insolvency/bankruptcy, there is a felt need for special dispensation for revival and exit of MSMEs. The MSMEs facing insolvency/bankruptcy need to be provided legal opportunities to revive their units, it said.
This could be through a scheme for re-organization and rehabilitation, which balances the interests of the creditors and debtors.
It is expected that above Framework will help the lenders and debtors in revival and rehabilitation of enterprises and shall unlock the potential of MSMEs, besides improving our international ranking in Doing Business Index.