Product Country
Increase Font Size Decrease Font Size
Market News
Govt outlines easier exit norms for MSMEs
Nov 17, 2014

Sick units, rising non-performing assets, an exit policy and a new definition for micro, small and medium enterprises (MSMEs) are among the changes proposed in the amended MSME Act 2006.

A background note prepared by the MSME Ministry, heeding the recommendations of the Prime Minister’s Task Force, has proposed replacement of the Provincial Insolvency Act 1920 to enable ‘time-bound revival and exit’ for unincorporated firms.

Legal opportunity

“The MSME facing insolvency/bankruptcy should be provided legal opportunities to revive it units,” says the note, adding that this could be by way of a “re-organisation or rehabilitation scheme with comfort to creditors…”

As per the proposed changes, an MSME can file an application voluntarily if accumulated losses equal half or more of its entire net worth of the previous financial year and the enterprise apprehends failure of its business.

The first appeal by an aggrieved enterprise/creditor before the appellate authority should be filed within 30 days, while the second appeal against the appellate authority’s order would lie before the Supreme Court, it said.

Revised definition

The draft amendment proposes to change the existing definition of MSMEs in the manufacturing sector based on investment in plant and machinery to Rs. 50 lakh from Rs. 25 lakh for micro units, up to Rs. 10 crore against the existing Rs. 5 crore for small units and up to Rs. 30 crore against Rs. 10 crore for medium enterprises.