For fulfilling its target of achieving a self- sufficient & capable economy the Government of India has started their sincere effort to grow the business sector of the country by giving various benefits& aids under the scheme of  Business”

Accordingly, as a part of the parcel of the last tranche of the relief package FM Sitharaman has introduced certain relaxations in the technical procedures & insolvency proceedings of the businesses failing on which they shall not be penalized as before taking care of the COVID-19 situations and which will help to them to run their business smoothly, reduce the burden of the courts & National Company Law Tribunal and above all, an opportunity to such companies to nurture. Some of the measures include-

1.     Suspension of fresh initiation of insolvency proceedings up to one year, govt has decided to exclude COVID 19 related debt from the definition of “default" under IBC.

2.     For MSMEs, a special insolvency framework will be notified under section 240-A of IBC.

3.  As a part of encouragement being given to MSMEs, the minimum threshold to initiate insolvency proceedings has been raised from to ₹1 crores from the earlier ₹1 lakh, which largely insulates MSMEs;

4. Decriminalization of certain offences involving minor technical or procedural defaults (i.e. shortcoming in CSR reporting’s, inadequacies in Board’s report, filling defaults, delay in Holding AGMs etc.)

5. To encourage fixing differences certain sections to be shifted to internal adjudication mechanism and powers of the Central Government (Regional Director) for compounding to be enhanced (58 sections to be dealt under the Internal Adjudication Mechanism) as compared to earlier 18 sections.

6. 7 compoundable offences to be dropped and 5 offences to be brought under the IAM provisions;

7. Permission to list the securities by Indian Public companies in permissible foreign jurisdictions;

8. Companies whose Non-convertible Debentures are listed on the Stock Exchanges are not to be regarded as listed entities;

9. Private companies whose Non-Convertible Debentures (NCDs) are listed on Stock Exchanges are not to be regarded as listed entities;

10. Provisions of Part IX A including provisions of (Producer Companies) under the Companies Act 1956 shall be applicable to Companies Act 2013;

11. The power is given to NCLT to create special/additional benches;

12.  Provisions of lower penalties for Small companies, OPCs, Producer & Start-up companies;


Now, this could be said to be a very responsible step by the Government of India to ensure that during such difficult times they could feel relaxed from the compliances which they were earlier not able to fulfil and stressed with the possibility of being a defunct or a default company.

The new provisions will certainly pave a way for the companies and corporate entities to save themselves from committing such defaults, the internal mechanisms will help companies to grow their capabilities to deal with disputes coming within the enterprise with the internal mechanisms and certainly relieve the burden of the NCLT. Also, there are possibilities for companies to undergo internal reconstructions or arrangements to save themselves from winding up during the period of suspension which is again a commendable action as given in the announcement.


eStartIndia Team

Leave a Comment

Previous Comments

Related Blogs