In order to provide a faster exit mechanism for certain class of entities under the Insolvency and Bankruptcy Code, the government is planning to put in place a fast-track resolution process, whose draft norms have recently been issued by the Insolvency and Bankruptcy Board of India (IBBI) and comments on the same draft- named as ‘the draft IBBI (Fast Track Insolvency Resolution Process for Corporate Persons) Regulations, 2017’ have been sought from the public till May 8.
The proposed draft which was prepared by a working group constituted by the ministry will focus on three classes of entities- startups, small companies and companies or Limited Liability Partnerships (LLPs). As per it, a company or LLP which has not borrowed more than Rs 2 crore in any manner will be eligible for the process fast-track. Besides, small companies will be those fulfilling the criteria as laid down in the Companies Act, 2013, while startups are defined by the Department of Industrial Policy and Promotion (DIPP).
The draft norms do not spell out the timeframe for a fast-track process under the Code but it is expected to be 90 days. However, the Code provides for completing insolvency resolution process within 180 days and the timeframe starts from the insolvency commencement date and it also seeks to consolidate and amend laws relating to reorganisation as well as insolvency resolution of corporate persons, partnership firms and individuals in a time-bound manner.