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Thursday, September 15, 2016

New Procurement Norms and Fast-Track Exit Procedures


It is mandatory for government departments and public sector units to procure at least 20% from the micro and small organizations. The rule that came into effect from April 1, 2015 was designed to create greater opportunities for micro and small enterprises (MSE). To support the entrepreneurial ecosystem, the Startup India Action Plan recommended additional relaxation for tiny and new business units.

Accordingly, the new Policy Circular No. 1(2)(1)/2016-MA dated March 10, 2016 mandated the Central Ministries, Departments, and Public Sector Units to relax the prior experience and turnover norms for startups and MSEs. Eligible entities must have the technical capability to deliver goods and services that meet the required quality standards. The original order is reproduced below.

Fast Exit Provisions

The Insolvency and Bankruptcy Code, 2016 came into effect from May 28, 2016. The Code replaces archaic laws from the year 1902 and provides for fast-track insolvency procedure for small entities, including startups. Chapter IV lays out the provisions for the expedited exit option. Section 55(2) says that the classes of eligible corporate debtors will be notified by the Government and criteria will be:
  • Income or assets below a prescribed threshold,
  • Class of creditors or amount of debt, or
  • Any other notified category
According to section 56, the process will be completed within 90 days. However, the Code also provides for a one-time extension of maximum 45 days if a resolution is passed by a committee of the creditors by a majority of 75% of the voting share.

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