India: MSME’s And Insolvency And Bankruptcy Code
The Insolvency and Bankruptcy Code (Second Amendment) Ordinance, 2018 has brought relief to the Micro Small and Medium Enterprises (MSME) by relaxing the applicability of the provisions of Section 29A as regards submission of a resolution plan in case of such entities their favor.
It is one of the most significant amendments under the Insolvency and Bankruptcy Code and has a wide impact on the whole insolvency resolution regime. Section 29 A of IBC was introduced through an Ordinance and thereafter it brought into force, with the intention to restrain untrustworthy promoters from buying back assets at a subsidized price.
While the amendment was introduced with the intention to enforce fiscal discipline among corporate citizenry rather than making it a tool to incentive defaults (by first defaulting and then using the Code to come back and take over the company at reduced debt levels), it has resulted in a vacuum of Resolution Applicant especially in the MSME section.