Ease of Doing Business for MSMEs: India seems to have addressed the insolvency concerns peculiar to MSMEs by introducing an entirely new insolvency framework for MSMEs, an approach which only a few countries like Japan and Korea have followed so far.
Ease of Doing Business for MSMEs: The drive to revamp the Micro Small and Medium Enterprises (MSMEs) is more evident in present times than ever, perhaps, owing to a reason that MSMEs may provide a big push to the Government’s much-decorated vision of “Atmanirbhar Bharat”. The recent entry to the reforms, which India may witness, is a special insolvency framework for MSMEs. The present framework under the Insolvency and Bankruptcy Code, 2016 (“Code”) treats MSMEs at par with other big corporate entities, without regard to their unique attributes and inherent challenges. India seems to have addressed the insolvency concerns peculiar to MSMEs by introducing an entirely new insolvency framework for MSMEs, an approach which only a few countries like Japan and Korea have followed so far, while most of the countries have only tailored their existing general insolvency provisions to address certain MSME asks.
Reportedly, the new insolvency framework will follow the ‘debtor in possession’ model for insolvency proceedings contrary to the ordinary insolvency resolution process which follows ‘creditor in control’ system. To this end, apparently, the revised framework proposes to allow the promoters of the MSMEs to continue to manage the operations even after the commencement of the insolvency process, instead of transferring the control to the resolution professional. This mechanism would certainly avoid disruption in the business operations as the promoters are already well aware of the business nuances as compared to the resolution professionals, who generally do not possess the business acumen. This coupled with the proposed reduction in the timeline to 90 days for MSME insolvency, similar to the present regime for fast track insolvency, would also prevent deterioration of assets of the MSMEs.
Source: Financial Express
