Major Relief For Firms! Centre Considers Changes To Bankruptcy Law Amid Ongoing Lockdown

Major Relief For Firms! Centre Considers Changes To Bankruptcy Law Amid Ongoing Lockdown

Due to the ongoing lockdown, several companies have not been able to complete their contracts and payments, which can possibly leave them liable for action by creditors.

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In a major relief for companies and firms which have been affected by the coronavirus lockdown, the Centre has introduced a new clause in the Insolvency and Bankruptcy Code, 2016, which will halt bankruptcy proceedings for the next six months, and the relief can be extended, depending on the pandemic.

It is expected to be cleared by the Centre through a special order or ordinance.

The relief will not be applicable for companies that are already undergoing insolvency and bankruptcy.

As per the law enacted in 2016, even one day's delay in the repayment of loan could label a company as a Non-Performing Asset.

Due to the ongoing lockdown, several companies have not been able to complete their contracts and payments, which can possibly leave them liable for action by creditors. Several smaller companies, struggling with salaries, loan dues and Goods and Services Tax (GST) are turning into non-performing assets.

Finance Minister Nirmala Sitharaman had announced that if the current situation continued for any period beyond April 30, the government would suspend certain sections of the Insolvency and Bankruptcy Code for six months in order to prevent creditors and promoters to start insolvency proceedings against companies.

To restart an economy devastated by the virus lockdown after a record slump, the government is planning to reopen certain sectors.

Also Read: Centre To Clear All Pending Income Tax Refunds Upto Rs 5 Lakh Immediately, 14 Lakh Taxpayers To Benefit

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Editor : Prateek Gautam