Suspension of IBC: Spotlight now on schemes under the Companies Act

In view of the suspension of the IBC, the government must create an alternative framework. It is the need of the hour

The finance minister has announced the suspension of fresh insolvency proceedings for up to one year. During this period, the Insolvency and Bankruptcy Code, 2016 (IBC) will not be available for debt resolution and distressed companies and their creditors may turn to ‘schemes’ under the Companies Act, 2013.
 
The Companies Act provides the framework for schemes of ‘compromise or arrangement’ between ‘a company and its creditors or any class of them’ or ‘a company and its members or any class of them’. These provisions are used extensively in mergers, demergers, and amalgamations; their use for debt restructuring has not