Most MSMEs fall outside bankruptcy code ambit

The vast number of MSMEs in the country fall outside a brand-new scheme for their turnaround under the Insolvency and Bankruptcy Code (IBC) as these are not registered as companies.

According to figures from the Ministry of Statistics and Programme Implementation, there are over 63 million unincorporated non-farm MSMEs in the country, going by a 2015-16 survey. These far outnumber the MSMEs which are registered as companies, around 780,000, or 60% of all active companies in the country, which will benefit from the pre-pack bankruptcy resolution scheme. These represent just above 1% of all the unincorporated MSMEs, implying that the informal sector businesses far outnumber the organized sector and will not be covered by the pre-pack bankruptcy resolution plan.

However, they have access to other schemes meant to relieve the stress in this sector including the rehabilitation plans of the MSME ministry, RBI and the Rs. 3 trillion emergency credit line guarantee scheme rolled out last year.