COVID-19 pandemic has impacted businesses, financial markets and economies all over world, including India, and has impacted the business operations of micro, small and medium enterprises & exposed many of them to financial distress.
Minimum amount of default for
initiation of corporate insolvency resolution process was made 1 crore, and suspending filing of applications for initiation of corporate insolvency resolution process in respect of the defaults arising during the period of 1
year beginning from 25th March 2020, suspension of which has ended on 24th March 2021.
Section 11 of the Insolvency & Bankruptcy Code (Amendment) Ordinance, 2021 inserted the term pre-package insolvency resolution process.
The Ordinance allows appeal against an order approving the pre-packaged resolution plan on the grounds laid down in sub-section (3) of section 61 of IBC.
This pre- package helps in micro, small, medium enterprises debtor to apply for IRP. The special scheme of MSME was brought “due to the unique nature of their businesses and simpler corporate structures”.
A new chapter III-A has been inserted on pre-packaged insolvency resolution process. Where the process shall be initiated within 90 days.
The corporate debtor shall obtain an approval from its financial creditors, not being its related parties, representing not less than 66%. in value of the financial debt due to such creditors, for the filing of an application for initiating pre-packaged insolvency resolution process.
The chapter talks about Corporate debtors eligible for pre-packaged insolvency resolution process, Duties of RP before initiation of process, Application to initiate the process, time limit for completion, declaration of moratorium & public announcement, powers & duties of RP, List of claims & preliminary
information memorandum, approval of plan, appeal & termination.
The ordinance has been brought for quicker, cost-effective and value maximising outcomes for all the stakeholders, in a manner which is least disruptive to the continuity of their businesses and which preserves jobs.