Simple measures can help address challenges faced by insolvency regimes amid COVID-19: WB Group official

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Simple measures can help address challenges faced by insolvency regimes amid COVID-19: WB Group official
New Delhi, Jun 24 () Amid the coronavirus pandemic, preventing a viable firm from prematurely being pushed into insolvency, addressing individual financial distress and other challenges for insolvency regimes can be addressed through simple, transparent and time-bound measures, according to a World Bank Group official.

Mahesh Uttamchandani, World Bank Group -- Global Lead, on Wednesday also said that due to the pandemic, 100 million people who were uplifted from poverty globally would fall back into poverty.

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Speaking at a webinar on 'Impact of COVID 19 on the Insolvency and Bankruptcy regime - Global and Indian responses', he said, "the pandemic has reduced demand for firms' products, disrupted supply and tightened credit".

Highlighting the challenges faced by insolvency regimes during the pandemic, he said there would be key challenges in three phases.

In the first phase, preventing a viable firm from prematurely being pushed into insolvency would be a challenge.

To address the issue, Uttamchandani suggested implementing extraordinary measures for a limited period of time like increasing the barriers to creditor-initiated insolvency filings and ensuring complementarities with debt repayment emergency measures.

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In the second phase, the challenge would be in responding to the increased number of firms that would not survive this crisis without going through insolvency, he noted.

According to him, the challenge can be tackled through measures like establishing out-of-court or hybrid workout frameworks, facilitating business rescue through bridge financing and encouraging e-filings.

In the third phase, he said the challenge would be to address individual financial distress resulting from the crisis.

The challenges can be addressed through simple, transparent and time-bound measures, he noted.

Antonia Menezes, World Bank Group's Insolvency and Debt Restructuring Policy Advisor, said implementing modern consumer bankruptcy frameworks which are still non-existent or outdated in many emerging markets and developing economies can help address the issues in the third phase.

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Enabling a debt forgiveness mechanism or discharge is important for facilitating a fresh start, she said.

Anuradha Guru, Executive Director at the Insolvency and Bankruptcy Board of India (IBBI), said that as per certain estimates, there is a projection of 19 per cent increase in insolvencies and that in the US, mega bankruptcies have been projected.

She said the government has taken various steps to address the challenges, including extending procedural deadlines for a limited period of time. Besides, RBI has also announced policy measures to like providing moratorium, she added.

The webinar was organised by the Indian Institute of Insolvency Professionals of ICAI. SRS RAM
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