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Monday, October 26, 2020

Govt extends suspension of new insolvency cases by 3 months

The government, in June, issued an Ordinance preventing the initiation of insolvency proceedings against companies for defaults in the six-month period starting March 25 under the Insolvency and Bankruptcy Code (IBC).

By: ENS Economic Bureau | New Delhi | September 25, 2020 1:34:45 am
The government, in June, issued an Ordinance preventing the initiation of insolvency proceedings against companies for defaults in the six-month period starting March 25 under the Insolvency and Bankruptcy Code (IBC).

The government on Thursday extended the time period, in which defaults by companies cannot be grounds for initiating insolvency proceedings, by three months, according to a notification by the Corporate Affairs Ministry.

The government, in June, issued an Ordinance preventing the initiation of insolvency proceedings against companies for defaults in the six-month period starting March 25 under the Insolvency and Bankruptcy Code (IBC).

L Viswanathan, partner at Cyril Amarchand Mangaldas, said the extension was in line with the time given to lenders and borrowers to restructure loans by the RBI, and “therefore if a restructuring is not initiated within the timeline stipulated by the RBI, lenders will have the right to initiate insolvency proceedings for future defaults.”

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