{"id":30887,"date":"2021-05-22T15:08:58","date_gmt":"2021-05-22T09:38:58","guid":{"rendered":"https:\/\/corpbiz.io\/learning\/?p=30887"},"modified":"2021-05-22T15:09:00","modified_gmt":"2021-05-22T09:39:00","slug":"government-helping-msmes-not-to-get-liquidated-under-ibc","status":"publish","type":"post","link":"https:\/\/corpbiz.io\/learning\/government-helping-msmes-not-to-get-liquidated-under-ibc\/","title":{"rendered":"Underlining Government Efforts to Prevent MSMEs from getting Liquidated under IBC amid Covid19"},"content":{"rendered":"\n<p class=\"has-drop-cap\">Micro, small and medium enterprises are\nsignificant contributor to the nation&#8217;s economy. It is also playing a pivotal\nrole in creating job opportunities for skilled and unskilled youth of India. But,\nthe arrival Covid-19 pandemic has dented their growth and left them in woes of\nfiscal instability and dearth of resources.<\/p>\n\n\n\n<p>As a result, many <a href=\"https:\/\/corpbiz.io\/msme-registration\"><strong>MSMEs<\/strong><\/a>, particularly the new ones, have opted to shut down their operation, leading to the liquidation of their assets. As more and more MSMEs faded away quickly, the government tried to retaliate by inculcating mandatory provisions under the IBC. In this write-up, we will talk about the measure taken by the Indian government to protect MSME from getting liquidated under IBC amid the Covid-19 pandemic.&nbsp;<\/p>\n\n\n\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_82_2 counter-hierarchy ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title ez-toc-toggle\" style=\"cursor:pointer\">Page Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Toggle Table of Content\"><span class=\"ez-toc-js-icon-con\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 eztoc-toggle-hide-by-default' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/corpbiz.io\/learning\/government-helping-msmes-not-to-get-liquidated-under-ibc\/#Significance_of_Micro_Small_and_Medium_Enterprises_in_India\" >Significance of Micro, Small and Medium Enterprises in India<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/corpbiz.io\/learning\/government-helping-msmes-not-to-get-liquidated-under-ibc\/#Erstwhile_Threshold_Limit_for_Micro_Small_and_Medium_Enterprises\" >Erstwhile Threshold Limit for Micro, Small and Medium Enterprises<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/corpbiz.io\/learning\/government-helping-msmes-not-to-get-liquidated-under-ibc\/#Insolvency_Law_Committee_Report_on_Micro_Small_and_Medium_Enterprises\" >Insolvency Law Committee Report on Micro, Small and Medium\nEnterprises<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/corpbiz.io\/learning\/government-helping-msmes-not-to-get-liquidated-under-ibc\/#Defending_MSME_from_getting_liquidated_under_IBC_Highlighting_Amendments_under_IBC_for_MSMEs\" >Defending MSME from getting liquidated under IBC:\nHighlighting Amendments under IBC for MSMEs<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/corpbiz.io\/learning\/government-helping-msmes-not-to-get-liquidated-under-ibc\/#Shielding_MSME_from_getting_liquidated_under_IBC_Other_Modifications_Regarding_CIRP\" >Shielding MSME from getting liquidated under IBC: Other Modifications\nRegarding CIRP<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/corpbiz.io\/learning\/government-helping-msmes-not-to-get-liquidated-under-ibc\/#Key_benefits_of_a_Pre-Pack_Insolvency_Scheme\" >Key benefits of a Pre-Pack Insolvency Scheme<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/corpbiz.io\/learning\/government-helping-msmes-not-to-get-liquidated-under-ibc\/#Conclusion\" >Conclusion<\/a><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Significance_of_Micro_Small_and_Medium_Enterprises_in_India\"><\/span>Significance of Micro, Small and Medium Enterprises in India<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The notion of&nbsp;MSMEs&nbsp;comprises the\nfirst-ever legal framework for knowing the paradigm of enterprise, which\ninvolves both manufacturing and repair entities. It specifies medium-sized\nfirms and seeks to bring together three tiers of the enterprises, viz- micro,\nsmall &amp; medium.&nbsp;The Act also talk about the statutory consultative\nmechanism at the country level with a wide range of advisory functions and\nbalanced representation of stakeholders&#8217; sections.<\/p>\n\n\n\n<p>MSME ensures industrialization of rural and backward areas, thereby bridging gaps created due to regional imbalances. Also, this sector help in deploying relatively low capital cost compared to more prominent firms.&nbsp;Micro, small and medium enterprises act as ancillary units for the large industries, and they are the key growth driver of the nation&#8217;s socio-economic development.&nbsp;<\/p>\n\n\n\n<p class=\"text-left\"><b>Read our article<\/b>:<mark style=\"background: #fffd03 !important;\"><a href=\"https:\/\/corpbiz.io\/learning\/vcfo-services-can-help-msmes-to-operate-better-than-ever\/\">How VCFO Services can Help MSMEs to Operate Better than Ever? <\/a><\/mark><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Erstwhile_Threshold_Limit_for_Micro_Small_and_Medium_Enterprises\"><\/span>Erstwhile Threshold Limit for Micro, Small and Medium Enterprises<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<table class=\"table table-bordered\">\n<tbody>\n<tr>\n<td colspan=\"4\" width=\"622\">\n<p style=\"text-align: center;\"><strong>MSME \u2013 Merged Criteria: Investment &amp; Annual Turnover<\/strong><\/p>\n<\/td>\n<\/tr>\n<tr>\n<td width=\"167\">\n<p><strong>Sector\/Enterprise Type<\/strong><\/p>\n<\/td>\n<td width=\"156\">\n<p><strong>Micro Enterprise<\/strong><\/p>\n<\/td>\n<td width=\"143\">\n<p><strong>Small Enterprise<\/strong><\/p>\n<\/td>\n<td width=\"156\">\n<p><strong>Medium Enterprise<\/strong><\/p>\n<\/td>\n<\/tr>\n<tr>\n<td width=\"167\">\n<p>Manufacturing &amp; Services Sector, Both<\/p>\n<\/td>\n<td width=\"156\">\n<p>Investment less than one crore rupees<\/p>\n<p>Turnover less than five crore rupees<\/p>\n<\/td>\n<td width=\"143\">\n<p>Investment less than ten crore rupees<\/p>\n<p>Turnover up to fifty crore rupees<\/p>\n<\/td>\n<td width=\"156\">\n<p>Investment less than fifty crore rupees<\/p>\n<p>Turnover up to Two hundred and fifty crore<\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n\n\n\n<p>After the arrival of Covid-19, the entire\nworking sectors were closed down except those which deals with medicines. It came\nas a sharp blow for manufacturing industries as they could not generate enough\nproduction orders. The pandemic pushed these industries to the back foot and\nfaded their options to counter primary liabilities, including loans.<\/p>\n\n\n\n<p>On the other hand, the creditors were left with\nno other option than to apply for liquidation under IBC before the tribunal to\nrecover their funds with interest. A resolution professional come to play to\nliquidate MSME&#8217;s assets and settle claims of the creditors.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Insolvency_Law_Committee_Report_on_Micro_Small_and_Medium_Enterprises\"><\/span>Insolvency Law Committee Report on Micro, Small and Medium\nEnterprises<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Previously, a threshold of Rs 1,00,000 as\ndefault was required to initiate the&nbsp;Corporate Insolvency Resolution\nProcess. This led to the avalanche of applications that eventually caused\ntrouble for the&nbsp;adjudicating authority.&nbsp;<\/p>\n\n\n\n<p>Thus, a government came under the relentless\npressure of reconsidering the minimum default threshold limit in view of\nsection 4 of the code and reducing it to an optimum level to overcome such\nchaotic situations. Finally, the adjudicating authority responded by amending\nthe said threshold limit.&nbsp;<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Defending_MSME_from_getting_liquidated_under_IBC_Highlighting_Amendments_under_IBC_for_MSMEs\"><\/span>Defending MSME from getting liquidated under IBC:\nHighlighting Amendments under IBC for MSMEs<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Under&nbsp;section 4 of the IBC, 2016,&nbsp;the\nadjudicating authority amended the minimum default limit by raising it from 1\nlakh rupees to 1 crore rupees. This means that the concerned creditor cannot\nfile a petition under the IBC act unless the default threshold limits surpass\nthe new limit, i.e. one crore rupees. <\/p>\n\n\n\n<p>The provision came alive on 24th March 2020.\nConsidering the state of crisis that MSMEs were encountering, this move was\ncertainly welcome. Apart from mitigating the threat of being challenged in the\ntribunal, the decision helped many MSMEs to focus on their core issues.&nbsp;<\/p>\n\n\n\n<p>Soon after the introduction of the aforesaid\nmeasure, the Ministry of MSME stepped forward to amend the threshold\nlimit.&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">The criterion for MSMEs was as specified below<\/h3>\n\n\n\n<p>Micro\nEnterprises\u2013 where the investment in plant &amp; machinery is not more than one\ncrore rupees &amp; where the turnover stays well below five crore rupees.<\/p>\n\n\n\n<p>Small\nEnterprises\u2013 where the investment in plant &amp; equipment is within the range\nof ten crore rupees &amp; where the turnover is below the 50 crore rupees.<\/p>\n\n\n\n<p>Medium\nEnterprises\u2013 where the investment in plant &amp; machinery is not higher than\n50 crore rupees &amp; where the turnover is less than 250 crore rupees.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Shielding_MSME_from_getting_liquidated_under_IBC_Other_Modifications_Regarding_CIRP\"><\/span>Shielding MSME from getting liquidated under IBC: Other Modifications\nRegarding CIRP<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The MSMEs&#8217; promoters who aren&#8217;t willful defaulters can bid for their assets. To do so, they need to file a resolution plan that acts as a counter-petition against potential suitors under a Swiss challenge. However, the authenticity of the resolution plan largely depends on the parties who approved it\u2014approval from the valid financial creditors having a minimum of 66% voting power is more than enough in this regards.&nbsp; This entire arrangement is only to distresses MSMEs and creditors who are having a tough time reconciling fiscal turbulence.&nbsp; <\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Key_benefits_of_a_Pre-Pack_Insolvency_Scheme\"><\/span>Key benefits of a Pre-Pack Insolvency Scheme<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<div class=\"wp-block-image\"><figure class=\"aligncenter is-resized\"><img decoding=\"async\" src=\"https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2021\/05\/Key-benefits-of-a-Pre-Pack-Insolvency-Scheme.png\" alt=\"Key benefits of a Pre-Pack Insolvency Scheme\" class=\"wp-image-30973\" width=\"518\" height=\"420\" srcset=\"https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2021\/05\/Key-benefits-of-a-Pre-Pack-Insolvency-Scheme.png 997w, https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2021\/05\/Key-benefits-of-a-Pre-Pack-Insolvency-Scheme-300x243.png 300w, https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2021\/05\/Key-benefits-of-a-Pre-Pack-Insolvency-Scheme-768x623.png 768w\" sizes=\"(max-width: 518px) 100vw, 518px\" \/><\/figure><\/div>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Conclusion\"><\/span>Conclusion<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>MSME is a growth-oriented sector that has a lasting impact on the Indian economy- thus, its well-being is immensely important. The <em><strong>Government<\/strong><\/em><sup><a href=\"https:\/\/en.wikipedia.org\/wiki\/Government\"><em><strong>[1]<\/strong><\/em><\/a><\/sup> attempt to raise the default threshold scheme is indeed a proactive move as its shows their intention to resolve the issue at any cost. Undoubtedly, these measures have prevented MSMEs from getting liquidated under IBC, and hopefully, they will keep the economy moving forward in the right direction. <\/p>\n\n\n\n<p class=\"text-left\"><b>Read our article<\/b>:<mark style=\"background: #fffd03 !important;\"><a href=\"https:\/\/corpbiz.io\/learning\/analyzing-provisions-under-msmed-act-for-payment-dues-toward-msmes\/\">Analyzing Provisions under MSMED Act for Payment Dues Toward MSMEs <\/a><\/mark><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Micro, small and medium enterprises are significant contributor to the nation&#8217;s economy. It is also playing a pivotal role in creating job opportunities for skilled and unskilled youth of India. But, the arrival Covid-19 pandemic has dented their growth and left them in woes of fiscal instability and dearth of resources. As a result, many [&hellip;]<\/p>\n","protected":false},"author":22,"featured_media":30975,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":[],"categories":[176],"tags":[1763],"acf":{"service_id":"71"},"authorName":"Pankaj Tyagi","authorImageUrl":"https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2022\/01\/MicrosoftTeams-image-42.jpg","authorDescription":"Pankaj has a diverse experience of writing research papers, blog, and articles during his college time. Earlier, he was working as a tax consultant in a financial firm, but his interest in writing drives him to pursue a career in the writing field.","postViews":2906,"readingTime":4,"_links":{"self":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/30887"}],"collection":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/users\/22"}],"replies":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/comments?post=30887"}],"version-history":[{"count":22,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/30887\/revisions"}],"predecessor-version":[{"id":30974,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/30887\/revisions\/30974"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/media\/30975"}],"wp:attachment":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/media?parent=30887"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/categories?post=30887"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/tags?post=30887"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}