In a key relief for many financially stressed corporations amid the pandemic, the government has once again extended the suspension on fresh insolvency situations for 3 months, but specialists worry this extension may perhaps also lead to an financial expense of stopping resolution, major to more stressed assets.
On Tuesday, in an exercising of the powers conferred by section 10A of the Insolvency and Bankruptcy Code, 2016 (31 of 2016), the Centre notified a additional extension of 3 months from December 25, 2020.
Charanya Lakshmikumaran, Partner with Lakshmikumaran & Sridharan Attorneys, noted that the final extension probable beneath the present language of the Section, till March, 25 2021 has now also been notified by the Central Government.
He also stated that even though the suspension till March 2021 was anticipated, any additional suspension will pose important challenges.
“Unless the Act is amended, it is unlikely that a further extension of the suspension of the IBC post March 2021 can occur by a government notification,” he stated.
Additionally, the financial expense of stopping resolution of stressed corporations and maintaining capital and lenders’ income locked-in will heavily weigh on the government, Lakshmikumaran added.