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The Central Government recently promulgated the IBC Amendment Ordinance 2021, allowing a pre-packaged insolvency process for micro, small and medium enterprises (MSMEs), in consonance with international best practices. The ordinance in essence has amended the the Insolvency and Bankruptcy Code 2016 allowing the Central Government to notify such pre-packaged process for defaults of not more than Rs. 1 crore to be initiated by the corporate debtor.
The Ordinance inter alia has inserted a new Chapter-IIIA in the IBC 2016 to provide for making an application for initiating pre-packaged insolvency resolution process in respect of a corporate debtor classified as a micro, small or medium enterprise (MSME) under sub-section (1) of section 7 of the Micro, Small and Medium Enterprises Development Act, 2006.
âIts Success May Open It For Other Borrowersâ: Experts Welcome Pre-Packaged Insolvency Process Introduced For MSMEsÂ
IBC will emerge as an invincible tool against future defaults
The Centre has promulgated the IBC Amendment Ordinance to allow a pre-packaged insolvency process for MSMEs.
Experts said that if successful, the regime may be available for other corporate borrowers.
L. Viswanathan, the Partner, Cyril Amarchand Mangaldas, said the government has cautiously introduced the pre-pack regime only for the MSME sector at this point in time, which is welcome. Depending on the success of the pre-pack regime for the MSME sector, one can expect this regime to be made available for other corporate borrowers , he added.
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Govt amends insolvency law; introduces pre-packaged resolution process for MSMEs
The government has amended the insolvency law to provide for a pre-packaged resolution process for micro, small and medium enterprises. An ordinance was promulgated to amend the Insolvency and Bankruptcy Code (IBC) on April 4, according to a notification. The latest move comes less than two weeks after the suspension of certain IBC provisions ended. The suspension wherein fresh insolvency proceedings were not allowed for a year starting from March 25, 2020 was implemented amid the coronavirus pandemic disrupting economic activities.
As per the ordinance, it is considered necessary to urgently address the specific requirements of Micro, Small and Medium Enterprises (MSMEs) relating to the resolution of their insolvency, due to the unique nature of their businesses and simpler corporate structures.
Representational image.
An ordinance was promulgated to amend the Insolvency and Bankruptcy Code (IBC) on April 4, according to a notification The government has amended the insolvency law to provide for a pre-packaged resolution process for micro, small and medium enterprises.
An ordinance was promulgated to amend the Insolvency and Bankruptcy Code (IBC) on April 4, according to a notification.
The latest move comes less than two weeks after the suspension of certain IBC provisions ended. The suspension wherein fresh insolvency proceedings were not allowed for a year starting from March 25, 2020 was implemented amid the coronavirus pandemic disrupting economic activities.
As per the ordinance, it is considered necessary to urgently address the specific requirements of Micro, Small and Medium Enterprises (MSMEs) relating to the resolution of their insolvency, due to the unique nature of their businesses and simpler corporate structures.