New Delhi: In a major relief for companies going through insolvency under the Insolvency and Bankruptcy Code (IBC), the IBBI on Sunday said that the period of lockdown will not be counted within the timeline for resolution process.
In a notification, the IBBI announced the insertion of regulation '40C', a special provision related to timeline of Corporate Insolvency Resolution Process (CIRP) under the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016.
The notification said that as per the regulation, "The period of lockdown imposed by the Central Government in the wake of COVID19 outbreak shall not be counted for the purposes of the timeline for any activity that could not be completed due to such lockdown, in relation to a corporate insolvency resolution process."
It said that the regulation would immediately come into effect.
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Under the Insolvency and Bankruptcy Code (IBC) of 2016, the resolution process is required to be completed within 180 days of the admission of the application, which can be extended by another 90 days with the approval of the committee of creditors with a two-third (66%) majority of the voting shares.
However, the law requires the entire resolution process to be completed within 330 days from the date of commencement of the proceedings.
This is another major relief for the corporate world amid the coronavirus crisis. Among other recent changes under the IBC, Finance Minister Nirmala Sitharaman last week said that the threshold for default under the IBC has been raised to Rs 1 crore from the current Rs 1 lakh.
She also assured that the government will keep a watch on the situation and if the situation remains the same beyond April 30, the government may consider suspending Sections 7, 9, and 10 of the Insolvency and Bankruptcy Code (IBC) for six months. This will prevent companies from being forced into insolvency proceedings in such force majeure causes of default.
(With inputs from IANS)
