Fresh Corporate Insolvency Filings to be Suspended Temporarily
In order to bring relief to corporate borrowers hit hard by the economic difficulties posed by COVID-19, the Government of India has decided to amend the Bankruptcy Code to suspend provisions that trigger insolvency proceedings against defaulters. The Union Finance Minister had, in a press release dated March 24, 2020, indicated the suspension of key provisions of the Bankruptcy Code in case the economic difficulties continue on account of COVID-19.
We understand that an ‘ordinance’ would be promulgated to suspend three sections of the Bankruptcy Code, Section 7, 9 and 10 for six (6) months and suspension time can be extended up to one (1) year, based on the economic situation. An enabling provision with respect to extending time would be part of such ordinance.Section 7 and 9 of the Bankruptcy Code pertains to initiating of corporate insolvency proceedings by a ‘financial creditor’ and an ‘operational creditor’ respectively. Section 10 relates to filing an application for insolvency resolution by a corporate.