Govt proposes amendments to MSME Act; seeks states' comments

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SME Times News Bureau | 25 Nov, 2014
The Union government has sought comments from the states and UTs on proposed amendments to the MSME Act to enable time-bound exit and revival of loss making units, among others, reports media.

The MSME Ministry has written to Chief Secretaries of states and Union Territories in this regard and sought comments from them at the earliest, the ministry said in a note.

It has proposed amendments to the Micro, Small & Medium Enterprises (MSME) Act with the twin objectives of time-bound exit and revival of loss-making units to help them consolidate their businesses and re-deploy capital in other greenfield ventures.

As of now, there is no legal framework for re-organisation winding up or exit for small units leading to a huge wastage of human resources (promoters and employees), capital (banks & financial institutions) and physical resources (industrial land & buildings, plant, machinery, etc).

The proposed amendments include establishment of revival and exit committee as an adjunct to MSME facilitation council and establishment of appellate authority.

Moreover, an MSME can file an application voluntarily if accumulated losses of the enterprise equals to half or more of its entire net worth for last financial year and enterprise apprehends failure of its business specifying revival plan or exit through liquidation proceedings.

Upon filing, an automatic moratorium for a period of 180 days shall operate (extendable to 30 days more at a time till revival plan or liquidation proceedings initiated).

Besides, on appeals and discharge, the first appeal by an aggrieved enterprise/creditor should be presented before appellate authority within 30 days; whereas the second appeal against appellate authority's order would lie before the Supreme Court.

It also proposes to review of definition of MSME to provide for higher capital ceiling by amending the provision relating to definition of MSMEs in the Act, reports a leading news agency.

It suggests doubling the capital ceiling for manufacturing units of micro enterprises from Rs 25 lakh at present to Rs 50 lakh. Similarly, for small enterprises, it proposes to hike the limit from Rs 5 crore to Rs 10 crore.

It has also suggested tripling the limit for medium enterprises from Rs 10 crore to Rs 30 crore.

For services sector units, the proposal entails doubling the investment limit in plant and machinery from Rs 10 lakh to Rs 20 lakh for micro enterprises. For small enterprises belonging to the category, it has suggested raising the limit from Rs 2 crore to Rs 5 crore; whereas for medium enterprises the proposed increase is from the present Rs 5 crore to Rs 15 crore.