MCA Extends Suspension of Fresh Proceedings Under the Insolvency and Bankruptcy Code (IBC) Till Mar’2021 and Appoints 21/12/2020 as date for Certain Provisions to Come Into Force
December 28, 2020
Ministry of Corporate Affairs (MCA) has extended the suspension of fresh proceedings under the Insolvency and Bankruptcy Code (IBC) till March 24, 2021
To help businesses cope with the lingering difficulties posed by the COVID-19 pandemic. All defaults arising on or after March 25, when the national lock down was imposed to curb the pandemic, will effectively remain out of the insolvency net for a full year. The government has already obtained Parliamentary approval, through the Insolvency and Bankruptcy Code (Second Amendment) Bill, 2020, for an up to one-year suspension of the initiation of insolvency proceedings for fresh defaults from March 25. Initially, the suspension of fresh proceedings under the IBC was for six months starting from March 25 and then, it was extended by three months. Now, the suspension has been further extended by three months which will end on March 24, 2021.The government had suspended the invocation of three Sections – 7, 9 and 10 of the IBC for COVID related defaults. These sections deal with the initiation of the insolvency proceedings by financial and operational creditors and corporate debtors.
MCA has notified the dates as 21-12-2020 as the date from which certain provisions shall come into force. The Companies (Amendment) Act, 2020 has introduced several measures to improve the ease of doing business and decriminalize certain offences. The Companies (Amendment) Act, 2020, which amends the Companies Act, 2013, has been published in the Official Gazette on September 28, 2020. The Amendment Act’ does away with imprisonment as a consequence of a violation of certain provisions of the Companies Act, 2013. It also reduces or modifies the fines/penalties for certain offences under the Companies Act, 2013. The Amendment Act has now reduced the one-time penalty payable by companies in case of contravention of failure to file an annual return to INR 10,000 from INR 50,000, and in case of continuing offences, a fine of INR 100 for every day subject to a reduced limit of INR 200,000 from INR 500,000. Further, Imprisonment has been removed as a punishment for contravention of the provisions in relation to (i) buy-back of securities; (ii) financial statements and board’s report; (iii) knowingly functioning as a director despite the seat being vacated due to disqualification; (iv) constitution of the audit committee, nomination and remuneration committee and stakeholders relationship committee; and (v) disclosure of interest by director and participation in relation to matters in which he is interested. In addition, the Amendment Act extends provisions of the Companies Act relating to reduced fines for certain offences presently applicable to one-person companies or small companies to producer companies and start-up companies as well.
Last updated: 24/12/2020
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Senior Associate- Legal