After making the insolvency process easier for companies, the focus is now turning to proprietary firms.
The NITI Aayog will have a meeting, in this regard, with the Insolvency and Bankruptcy Board (IBB), the ministry of small and medium enterprises and insolvency professionals on Wednesday.
An official said, “NITI Aayog wants to expedite this process as the current provisions only allow companies and limited liability partnerships to file for insolvency.”
IBB plans to notify the bankruptcy provisions in the Insolvency and Bankruptcy Code (IBC).
At least 90 per cent of small firms are proprietary firms, said insolvency professionals. Once the bankruptcy provisions are notified, these proprietary firms will benefit, as IBB plans to consider them as individuals.
The IBB plans to notify the bankruptcy code in three phases. The first will be of corporate guarantors. In the second phase, an individual with proprietary business will be included and in the last phase, the insolvency regulator will frame rules for individuals.
A bankruptcy law will help individuals who now have to go to district courts for the process, which is tedious and time consuming. Insolvency professionals state that filing bankruptcy takes many months.
Recently, the government notified fast-track resolution process for start-ups, bringing down the resolution time to
90 days, from 180 days.
So far, the IBB has notified the sections pertaining to cross-border insolvency.
However, the rules haven’t been framed yet. The government is consulting the industry for recommendations on what the rules should be.