Small Firms, Startups Fall Under Fast-Track Insolvency Mechanism
Insolvency bankruptcy board notifies fast track resolution process
Small companies and startups have been brought under the ambit Insolvency and Bankruptcy Code as the efforts to resolve banks’ stressed assets gather speed.
The Insolvency and Bankruptcy Board of India notified the rules, which also cut the time for insolvency proceedings by half to 90 days for these companies. The Fast Track Insolvency Regulation Resolution Process For Corporate Persons, which came into effect from June 14, lays out specific eligibility criteria for a particular loan to qualify under the new route.
The notification, which specifies the eligibility of those corporate debtors who can opt for the fast-tracking route, will apply to small companies as defined under the Companies Act 2013, startups as defined by the Ministry of Industry and Commerce, as well as small industries with assets worth Rs 1 crore or less, as reflected in their financials filed in the previous year.
Formed after the Insolvency and Bankruptcy Code, 2016 became operational, the Board has also laid out the framework for appointing an interim resolution professional, who will be part of the adjudication process and will determine if the matter qualifies for fast-tracking. The professional will have to make a decision within 21 days of being appointed to do so, according to the notification.