Govt amends IBC, introduces pre-packaged resolution process for MSMEs
The amendment allows the Centre to notify the minimum amount of default value, not more than Rs 1 crore, for pre-packaged insolvency resolution process.
BusinessToday.In | April 5, 2021 | Updated 14:59 IST
The government had last year suspended fresh insolvency proceedings for six months from March 25. The suspension was extended twice by three months.
The government on Sunday amended the Insolvency and Bankruptcy Code, 2016 by promulgating an Ordinance to provide pre-packaged resolution for micro, small and medium enterprises (MSMEs).
The amendment allows the Centre to notify the minimum amount of default value, not more than Rs 1 crore, for pre-packaged insolvency resolution process.
Synopsis
A pre-packaged resolution essentially translates to a company preparing a restructuring plan with its creditors before initiating insolvency proceedings. This helps to cut down the time and costs in the overall process.
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In June 2020, the government promulgated an ordinance that suspended initiation of new insolvency proceedings for defaults.
The Central Government has promulgated Insolvency and Bankruptcy Code (Amendment) Ordinance 2021 to allow pre-packaged insolvency process for MSMEs.
The Ordinance, in essence, has amended the Insolvency and Bankruptcy Code 2016 and allows the Central Government to notify such pre packaged process for defaults of not more than Rs 1 crore.
The government had been looking to offer a pre-packaged resolution framework for stressed companies under the IBC. A pre-packaged resolution essentially translates to a company preparing a restructuring plan with its creditors before initiating insolvency proceedings. This helps to cut do
Centre brings ordinance to introduce pre-packaged debt resolution process for MSMEs
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
PTI | April 5, 2021 | Updated 14:48 IST
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.
Seeking to provide a quicker and value-maximising outcome for stressed MSMEs, the government has introduced a pre-packaged resolution process for such enterprises by amending the insolvency law. Now, Micro, Small and Medium Enterprises (MSMEs) can seek resolution for their stress through the pre-packaged process under the Insolvency and Bankruptcy Code (IBC). An ordinance was promulgated to amend the IBC on April 4. Many MSMEs have been impacted by the coronavirus pandemic and experts opined that the latest amendment, which comes less than two weeks after the suspension of certain IBC provisions ended, is a welcome move. 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.
The Centre has promulgated the IBC Amendment Ordinance to allow pre-packaged insolvency process for MSMEs.Experts said that if successful, the regime may be available for other corporate borrowers.L. Viswanathan, Partner, Cyril Amarchand .