Nirmala Sitharaman
Nirmala Sitharaman

Aatmanirbhar Bharat Package: No fresh insolvency proceedings for a year, Covid-19 related debt to be excluded from definition of Default

Aditi Singh

As part of the "Aatmanirbhar Bharat" economic package for structural reforms across sectors, Union Finance Minister, Nirmala Sitharaman has announced that COVID-19 related debts shall not be included in the category of default under the Insolvency & Bankruptcy Code, 2016.

Initiation of fresh insolvency proceedings shall also remain suspended for upto 1 year, depending on the situation of the pandemic.

The Finance Minister has also announced that the minimum threshold to initiate insolvency proceedings shall also be raised to Rs 1 crore from Rs 1 lakh.

Special insolvency resolution framework for MSMEs under Section 240A of the IBC shall be notified soon.

Announcements were also made for the decriminalisation of certain defaults under Companies Act.

Reforms under the Companies Act, 2013 will include:

- Decriminalisation of violations involving minor technical and procedural defaults such as shortcomings in CSR reporting, inadequacies in board report, filing defaults, delay in holding AGM etc.

- Shifting majority of compoundable offences to internal adjudication mechanism.

- Seven compoundable offences under the Act to be dropped and to be dealt with under the alternative framework.

- Measures to de-clog the criminal courts and NCLT.

- Creation of additonal/specialized benches for NCLAT.

Other key reforms are:

- Direct listing of securities by Indian public companies in permissible foreign jurisdictions.

- Private companies which list NCDs on stock exchanges not to be regarded as listed companies.

- Including provisions of Part IXA (Producer Companies) of Companies Act 1956 in Companies Act, 2013.

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