The Ministry of Corporate Affairs (MCA) has extended the suspension of insolvency proceedings initiation against corporates for debt defaults by another 3 months from 25 December to 25 March 2021.
For debt defaults arising from the COVID-19 lockdown, the central government had first introduced a 6-month suspension on Insolvency and Bankruptcy Code (IBC) proceedings on 5 June. The suspension was earlier extended from 25 September to 25 December.
With another extension, the government has been able to ensure that any corporate debt defaults arising between 25 March 2020 and 25 March 2021 will remain outside the IBC forever, experts quoted in a Business Standard report said.
The suspension of such proceedings was introduced to protect companies, especially small companies, from being pushed into insolvency or being liquidated due to financial constraints as a result of the lockdown.