| Introduction: Define IBC briefly Body: Highlight its role in empowering SMEs and how can it be made more effective Conclusion: Way forward |
The Insolvency and Bankruptcy Code was enacted in 2016, and it replaced all the existing laws with a uniform procedure to resolve insolvency and bankruptcy disputes. The code aims to address the issue of Non-performing Assets (NPAs) and debt defaults.
Role of IBC in empowering creditors, especially SMEs
- Level Playing Field: The IBC offers operational creditors, such as SMEs, a legal framework that guarantees a level playing field. It enables them to file for bankruptcy on behalf of noncompliant debtors.
- Time-Bound Resolution: To cut down on the time and resources needed by creditors to collect their debts, the IBC requires time-bound resolution procedures. This is especially helpful for SMEs, as they do not have the resources to fight protracted legal battles.
- Professionals in Insolvency: Hiring insolvency specialists guarantees a clear and methodical approach to the settlement procedure. For SMEs who might not have the necessary experience to handle complicated bankruptcy procedures, this can be helpful.
- Maximization of Asset Value: IBC aims to maximize the value of the debtor’s assets, ensuring that creditors, including operational creditors, receive a fair share during the resolution process.
Improving IBC for the Benefit of SMEs:
- Simplified Processes: Introduce simplified and cost-effective processes specifically tailored to the needs and capacities of SMEs. This can include reducing procedural complexities and lowering associated costs.
- Capacity Building: Invest in capacity building for SMEs to enhance their understanding of the IBC processes. This can involve conducting awareness programs, workshops, and providing accessible information on insolvency procedures.
- Fast-Track Mechanism: Establish a fast-track mechanism within the IBC for smaller cases involving SMEs. This can expedite the resolution process, ensuring quicker recovery of dues.
- Debt Recovery Tribunals (DRTs): Strengthen Debt Recovery Tribunals to handle smaller cases efficiently. This can provide a more accessible and specialized forum for SMEs to resolve their insolvency-related issues.
Conclusion
In conclusion, even while the IBC has greatly improved the standing of operational creditors, particularly SMEs, continued improvements and focused initiatives can increase its efficacy in addressing the unique difficulties encountered by smaller businesses.
