IBBI Proposes Amendment to Boost MSME Participation in Insolvency Resolution

New Delhi, Aug 27 (KNN) The Insolvency and Bankruptcy Board of India (IBBI) has put forward a significant amendment to corporate insolvency regulations, specifically targeting support for micro, small, and medium enterprises (MSMEs).

This move comes as part of ongoing efforts to streamline the insolvency resolution process and create a more inclusive environment for smaller businesses.

The proposed change would require corporate debtors to disclose their MSME status at the outset of the resolution process. This disclosure is expected to have far-reaching implications for the insolvency landscape in India.

"The proposed amendment is expected to reduce information asymmetry in the resolution process for MSMEs," the IBBI stated. "It may also encourage greater participation from potential resolution applicants who may have otherwise been uncertain about their eligibility."

The IBBI further elaborated on the technical aspects of the amendment, stating, "It is proposed to amend Regulation 36 of the CIRP Regulations for making disclosures about the status of the corporate debtor, being registered or not, as a micro, small or medium enterprise in accordance with the provisions of the MSME Development Act, 2006."

This amendment, if implemented, could mark a turning point in how MSMEs engage with the insolvency resolution process.

By mandating upfront disclosure of MSME status, the IBBI aims to create a more transparent and efficient system that could potentially attract a wider pool of resolution applicants.

The move aligns with the government's broader push to support MSMEs, which are often described as the backbone of the Indian economy.

By addressing the unique challenges faced by these enterprises in the insolvency process, the IBBI is taking a proactive step towards fostering a more resilient and dynamic business environment.

As the proposal moves through the regulatory process, stakeholders in the insolvency ecosystem will be watching closely to see how this change could reshape the landscape of corporate restructuring in India, particularly for smaller enterprises.

(KNN Bureau)