Analysts say that faster resolution of smaller cases would encourage investments in startups.

Shutting down startups just got easier Insolvency board proposes 90-day fast track
Atom Startups Tuesday, April 18, 2017 - 11:56

In what could come as good news at a time when many startups are shutting operations, the Insolvency and Bankruptcy Board of India (IBBI) is considering a proposal to expedite the resolution of smaller and less complicated cases. This also includes those involving start-ups and the resolution will be expedited to 90 days.

IBBI Chairman MS Sahoo told The Financial Express that a draft on this will be out in a day or two. “An idea is being discussed wherein smaller cases could have slightly different procedures in terms of insolvency resolution. There could be differential treatment in terms of time, he added”

The board has been set up under the Insolvency and Bankruptcy Code and helps wrapping up the insolvency resolution process in 180 days from the date an application to initiate the resolution is admitted.

The report states that a faster resolution of smaller cases will encourage investments in startups. This is in fact, one of the reasons why the government wanted to give start-ups an option to exit within 90 days, as part of its start-up India initiative, wanted to give. Currently, at least 35 corporate insolvency resolution processes are going on under the Insolvency and Bankruptcy Code.

As per a PTI report, the code seeks to consolidate and amend laws relating to reorganisation and insolvency resolution of corporate persons, partnership firms and individuals in a time-bound manner. But the IBBI and the National Company Law Tribunal (NCLT) have the power to penalise in case an insolvency process has been triggered in a fraudulent manner, depending on which entity it is that has indulged in a fraudulent act.

Image: Nick Youngson

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