It is now official that fresh insolvency proceedings against companies or individuals will not be initiated for at least 6 months starting March 25. The Rajya Sabha passed the Insolvency and Bankruptcy Code (Second Amendment) Bill, 2020.
The Bill mandates that a default on any repayments from March 25, when a nationwide lockdown was imposed to curb the spread of coronavirus, will be not considered for initiating insolvency proceedings for at least six months.
This move is expected to bring some saught after reaction from the industry but it very important to see how banks react to this development as with this.
Replying to the debate on the Bill in the House, Finance Minister Nirmala Sitharaman said its intention was to keep companies a “going concern” and not liquidate them.
The IBC code pertains to timely resolution of cases pertaining to insolvent companies and individuals. Insolvency means when a company, entity or an individual is no longer able to repay their outstanding debt.
The Bill seeks to replace an ordinance promulgated by the Centre in June to provide relief to strained borrowers owing to nationwide lockdown.