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The suspension of IBC was a measure originally announced by Nirmala Sitharaman on 17 May
The suspension of IBC was a measure originally announced by Nirmala Sitharaman on 17 May

Bankruptcy code suspended for three more months

This was done in order to protect companies in distress due to the pandemic being dragged into bankruptcy tribunals

New Delhi: The Central government on Thursday suspended the operation of the Insolvency and Bankruptcy Code (IBC) by another three months in order to protect companies in distress due to the pandemic being dragged into bankruptcy tribunals.

An official order issued by the ministry of corporate affairs said that the suspension of the Code, issued initially for six months expiring on Thursday is extended for another three months from 25 September.

The Code was earlier suspended for six months from 25 March to support recovery of firms from the financial stress during the pandemic without facing immediate threat of being pushed to insolvency proceedings.

The suspension of IBC was a measure originally announced by Nirmala Sitharaman on 17 May. While pausing fresh bankruptcy proceedings is considered a breather for many companies, it deprives lenders the opportunity to restructure certain companies which may be beyond redemption. The idea is to save viable firms even if it comes at the cost of keeping unviable ones alive during the period.

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