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Framework for Revival and Rehabilitation of MSMEs

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  • The Ministry of Micro, Small & Medium Enterprises has notified a Framework for Revival and Rehabilitation of MSMEs, in exercise of the powers conferred under section 9 of the Micro, Small and Medium Enterprises Development Act, 2006.
  • In India, the existing mechanism for addressing revival, rehabilitation and exit of small enterprises is very weak. The most recent Doing Business (DB) Report, a joint project of the World Bank and the International Finance Corporation, ranks India 137 out of the 189 economies for resolving insolvencies.
  • It notes that resolving insolvency takes 4.3 years on average and costs 9.0% of the debtor’s estate, with the most likely outcome being that the company will be sold as piecemeal sale.
  • Pending a detailed revision of the legal framework for resolving insolvency/bankruptcy, there is a felt need for special dispensation for revival and exit of MSMEs. The MSMEs facing insolvency/bankruptcy need to be provided legal opportunities to revive their units.  This could be through a scheme for re-organization and rehabilitation, which balances the interests of the creditors and debtors.

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