IBBI's Proposed Amendment to Support MSMEs

By Tanya Yadav --
Wednesday, 28 Aug, 2024

The Insolvency and Bankruptcy Board of India (IBBI) has proposed an important amendment to the corporate insolvency regulations aimed specifically at supporting micro, small, and medium enterprises (MSMEs). This amendment is part of ongoing efforts to simplify the insolvency resolution process and make it more accessible for smaller businesses.

Under the proposed change, corporate debtors would be required to disclose their MSME status at the beginning of the insolvency resolution process. This new requirement is expected to have significant effects on the insolvency landscape in India.

According to the IBBI, this amendment is designed to reduce the lack of information that often complicates the resolution process for MSMEs. By making MSME status clear from the outset, the amendment could also encourage more potential resolution applicants to participate, especially those who might have been unsure about their eligibility.

The IBBI has outlined the technical details of the proposed amendment, stating that it would involve changes to Regulation 36 of the Corporate Insolvency Resolution Process (CIRP) Regulations. These changes would make it mandatory for corporate debtors to disclose whether they are registered as an MSME under the MSME Development Act, 2006.

If implemented, this amendment could significantly change how MSMEs interact with the insolvency resolution process. By requiring early disclosure of MSME status, the IBBI aims to create a more transparent and efficient system, which could, in turn, attract a larger number of resolution applicants.

This move is in line with the Indian government’s broader efforts to support MSMEs, which play a crucial role in the country’s economy. By addressing the unique challenges that smaller enterprises face during insolvency proceedings, the IBBI is taking proactive steps to create a more resilient and dynamic business environment.

As the proposal progresses through the regulatory process, all eyes will be on how this change might reshape corporate restructuring in India, especially for MSMEs. The amendment has the potential to make the insolvency process more inclusive and supportive of smaller businesses, further strengthening their role in the Indian economy.

IBBI's Proposed Amendment to Support MSMEs . The Insolvency and Bankruptcy Board of India (IBBI) has proposed an important amendment to the corporate insolvency regulations aimed specifically at supporting micro, small, and medium enterprises (MSMEs). This amendment is part of ongoing efforts to simplify the insolvency resolution process and make it more accessible for smaller businesses.

Under the proposed change, corporate debtors would be required to disclose their MSME status at the beginning of the insolvency resolution process. This new requirement is expected to have significant effects on the insolvency landscape in India.

According to the IBBI, this amendment is designed to reduce the lack of information that often complicates the resolution process for MSMEs. By making MSME status clear from the outset, the amendment could also encourage more potential resolution applicants to participate, especially those who might have been unsure about their eligibility.

The IBBI has outlined the technical details of the proposed amendment, stating that it would involve changes to Regulation 36 of the Corporate Insolvency Resolution Process (CIRP) Regulations. These changes would make it mandatory for corporate debtors to disclose whether they are registered as an MSME under the MSME Development Act, 2006.

If implemented, this amendment could significantly change how MSMEs interact with the insolvency resolution process. By requiring early disclosure of MSME status, the IBBI aims to create a more transparent and efficient system, which could, in turn, attract a larger number of resolution applicants.

This move is in line with the Indian government’s broader efforts to support MSMEs, which play a crucial role in the country’s economy. By addressing the unique challenges that smaller enterprises face during insolvency proceedings, the IBBI is taking proactive steps to create a more resilient and dynamic business environment.

As the proposal progresses through the regulatory process, all eyes will be on how this change might reshape corporate restructuring in India, especially for MSMEs. The amendment has the potential to make the insolvency process more inclusive and supportive of smaller businesses, further strengthening their role in the Indian economy.