In what could be seen as a good news for the Indian startup industry after a period of dull and slow growth, the Insolvency and Bankruptcy Board of India (IBBI) is finally contemplating expediting the resolution process of cases involving startups within a short time frame of 90 days, which would be half the time from the currently prevalent 180 days window. In the recent times, the Indian startup ecosystem has been witnessing some of the most shocking shutdowns and bankruptcy cases. Among them, the most shocking one that took everyone by surprise was when Stayzilla, India’s largest platform (website and app) for verified homestays and alternate stays, decided to shut down its shop abruptly in February this year. (Read Here).
According to industry experts, expediting the resolution process will lead to an encouraging investment environment in the Indian Startup ecosystem as most of the startups in the country find it hard to make it till two years. A recently published report by Xeler8 revealed that in India nearly one in two startups end up saying bye-bye sooner than later. This was one of the key reasons that the Indian government wanted to give startups an easy option to exit within 90 days as a part of its startup India initiative. As of today, India has at least 35 active corporate insolvency resolution processes going on under its Insolvency and Bankruptcy Code.
The IBBI, which came into existence on December 1, 2016, is considering putting out a draft on the cutting down of resolution days from 180 to 90 in a day or two. A final decision on the same is expected to be taken soon. The IBBI was set up under the Insolvency and Bankruptcy Code, which provides for conclusion of an insolvency resolution process within 180 days from the date of the admission of an application for initiating the resolution process by the adjudicating authority.
According to the recent rankings unveiled by the World Bank in its ease of doing business index 2017, India’s rank in resolving insolvency is as low as 136, which is worse than its overall rank of 130th among the 190 nations ranked.
The Insolvency and Bankruptcy Code was established by the Indian government to consolidate and amend laws relating to insolvency resolution and reorganisation of partnership firms, corporate persons, and individuals in a timely manner.
IBBI’s recent move is expected to improve India’s ranking on the global index in the coming few years.