Threshold for default under IBC norms raised from Rs 1 lakh to Rs 1 crore: FM Nirmala Sitharaman

The government may consider suspending section 7, 9 and 10 of the Insolvency and Bankruptcy Code (IBC) for 6 months if the present situation doesn't improve beyond April 30.

"We may consider suspending section 7, 9 and 10 of the IBC 2016 for a period of 6 months so as to stop companies at large from being forced into insolvency proceedings in such force majeure causes of default," finance minister Nirmala Sitharaman said in a press conference.

Sitharaman also announced that the threshold for default under IBC was being raised to Rs 1 crore from Rs 1 lakh earlier.

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"We are raising the default threshold to prevent triggering of IBC for MSMEs," she said.

The government also announced that no additional fees would be charged for late filing of any document required to be filled on the MCA-21 registry during a moratorium period from April 1 to September 30.

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The move is expected to not only reduce the compliance burden, including financial burden of companies and limited liability partnerships (LLPs) at large, but also enable long-standing non-compliant companies and LLPs to make a fresh start.

"The mandatory requirement of holding meetings of the Board of the companies within prescribed interval provided in the Companies Act (120 days), 2013, shall be extended by a period of 60 days till next two quarters i.e., till 30th September," a statement released by the government said.

The minister announced that for the year 2019-20, if independent directors of a company have not been able to hold even one meeting, it wouldn't be seen as a violation.

According to the Schedule IV of the Companies Act, independent directors are required to hold at least one meeting without the attendance of non-independent directors and members of management.

To ease burden on companies and auditors, the government announced that Companies (Auditor’s Report) Order, 2020 would be made applicable from the financial year 2020-2021 instead from 2019-2020 notified earlier.

"Non-compliance of minimum residency in India for a period of at least 182 days by at least one director of every company, under Section 149 of the Companies Act, shall not be treated as a violation," the statement said.