Centre promulgates IBC Amendment Ordinance
Published: Apr 07, 2021
By TIOLCORPLAWS News Service
NEW DELHI, APR 7, 2021: THE government has promulgated the Insolvency and Bankruptcy Code (Amendment) Ordinance, 2021 on April 4, to allow a pre-packed insolvency resolution process for Micro, Small and Medium Enterprise (MSME) debtors.
The amendments aimto provide an efficient alternative insolvency resolution framework for the MSMEs, ensuring "quicker, cost-effective and value maximising outcomes for all the stakeholders, in a manner which is least disruptive to the continuity of MSMEs businesses and which preserves jobs."
It allows only the debtor to trigger the bankruptcy process and lets the government notify such pre-packaged process for defaults up to Rs. 1 crore.
The Central government said the initiative is based on a trust model and the amendments honour the honest MSME owners by trying to ensure that the resolution happens and the company remains with them.
"It provides an efficient alternative insolvency resolution framework for corporate persons classified as MSMEs for timely, efficient and cost-effective resolution of distress thereby ensuring positive signal to debt market, employment preservation, ease of doing business and preservation of enterprise capital," they added.
It is expected that the incorporation of pre-packaged insolvency resolution process for MSMEs in the code will alleviate the distress faced by MSMEs due to the impact of the COVID-19 pandemic.
The pre-packaged insolvency process will also lead to lesser burden on the adjudicating authority, assured continuity of business operations for corporate debtor, less process costs and maximum assets realisation for financial creditors and rights protection for operational creditors.
