The issue of smooth exit of an enterprise has been a major concern, especially amongst the Micro, Small and Medium Enterprises (MSMEs). The Insolvency and Bankruptcy Code (IBC) is being seen as a significant step towards addressing this concern, Professor Bibek Debroy, Economist and Member of NITI Aayog said in an interview to KNN.

Debroy further spoke of the scenario under which the need for IBC was realized. He informed that for long there had been no satisfactory provisions for the enterprises that want to exit. Insolvency and bankruptcy code that was announced last year is therefore one first step in that direction.

Commenting upon the Revival and Rehabilitation Framework for the MSMEs that was formulated by the government, Debroy said that the concerns relating to the MSMEs aren’t uniform, while the Framework would continue to function towards revival, the IBC will help the MSMEs escape the trap it get into otherwise if it plans an exit.

Raising concern over majority of the MSMEs not being registered as companies, Debroy said that for smoother functioning of the IBC, it is essential that the enterprise is registered as a legal entity. This also is important to separate the enterprise from the entrepreneurs. He added that since the registration is not something that could be forced, the IBC is formulated in a manner that it could be extended to everyone.

Discussing the issue of the high costs that the MSMEs might incur in case it decides to go for IBC and resolution, Debroy acknowledged the fact that prices for consulting professionals are very high. He however maintained that these costs still stand less when compared to the costs the entrepreneur has to incur in case he is not able to exit.

Also a discussion session was organized recently by NITI Aayog and FISME collaboratively along the lines of Insolvency and Bankruptcy Provisions for MSMEs in New Delhi. Debroy chaired the discussion, key government officials and representatives from industry bodies were present at the event. (KNN/ DA)