The Insolvency and Bankruptcy Board of India (IBBI) has issued fresh guidelines that will give them more time on account of the lockdown.
The guidelines stated that “the period of lockdown imposed by the central government in the wake of Covid-19 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.”
The IBBI notification came into effect from March 29. The government had recently raised the threshold for default from Rs 1 lakh to Rs 1 crore to prevent triggering of insolvencies. The step was taken especially to safeguard the small and medium enterprises facing the brunt of lockdown.
The government may also consider scrapping the provision for triggering insolvencies for a period of six months by suspending section 7, 9 and 10 of IBC which enables a financial creditor, operational creditor or the promoter respectively to initiate proceedings against a company.
As Covid-19 grips the markets and economy, companies and lenders are bracing for the impact it would have on corporate bankruptcies.
The government is drawing up a relief package for industry with steps such as relaxation of asset-classification norms by banks, thus allowing companies to delay the repayment of loans, and tax holidays for the worst-hit sectors like aviation and hospitality.