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Healing Touch To Small Businesses
So what shall be the effect of these 21 days ? It is a question that shall be answered only with time.
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The world is going through an unprecedented crisis caused by a virus ! The COVID 19 as it being called. To combat the spread of this virus, countries across the globe have had to resort to means and ways that one could never have imagined a few months earlier.
India has been no exception. With rising number of people being affected by the pandemic, advisories had been issued by the Government of India to encourage businesses to permit the employees to work from home and take measures to restrict human interaction. Then on the 24th of March, 2020, the country witnessed an announcement by the Prime Minister to lockdown the entire country for a period of 21 days.Whilst such stringent steps are required to ensure the arrest of the pandemic in the country, however, the plight of the businesses which are being restricted is not unknown. With businesses coming to a halt for more than a month, the silent cry of the corporates and businesses did not go unheard. On 24 March 2020, the Government of India, in a welcome step has announced various regulatory and statutory relief measures in the areas of Income Tax, GST, Customs & Central Excise, Corporate Affairs, Insolvency & Bankruptcy Code (IBC), Fisheries and Banking Sector and Commerce.
In order to provide relief to businesses against the consequences of these testing times, the Government has announced the raise of the threshold of default under section 4 of the IBC 2016 to Rs 1 crore from the existing threshold of Rs 1 lakh. This would mean that only in the event of defaults of Rs 1 crore or above, a creditor would be entitled to trigger insolvency proceedings. The significant increase in the threshold of default, shall provide a breather to various MSMEs and SMEs from the threat of proceedings under the
Insolvency and Bankruptcy Code. In addition, the Government has also indicated that if the current situation continues beyond 30th of April 2020, then Section 7, 9 and 10 of the IBC 2016, whereunder an operational or financial creditor can trigger insolvency proceedings against a defaulter, may be suspended for a period of 6 months. Though this relief is yet to be assessed by the Government, yet, this would be a welcome step to ensure that companies at large are not forced into insolvency proceedings.
So what shall be the effect of these 21 days ? It is a question that shall be answered only with time. But, maybe knowing that regulatory and statutory measures will be in place to enable the country to fight back, is a sense of relief in these times of turmoil.
(With inputs from Ritwika Nanda Partners Trust Legal)
Disclaimer: The views expressed in the article above are those of the authors' and do not necessarily represent or reflect the views of this publishing house. Unless otherwise noted, the author is writing in his/her personal capacity. They are not intended and should not be thought to represent official ideas, attitudes, or policies of any agency or institution.