The Central Government on Sunday amended the Insolvency and Bankruptcy Code, 2016 by promulgating an Ordinance to allow pre-packaged Insolvency resolution process 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.
Government has taken several measures to mitigate the distress caused by the pandemic, including increasing the minimum amount of default for initiation of corporate insolvency resolution process to one crore rupees, and suspending filing of applications for initiation of corporate insolvency resolution process in respect of the defaults arising during the period of one year beginning from 25th March 2020. The suspension was extended twice by three months till December 24, 2020 and then March 24, 2021.
it is considered expedient to provide an efficient alternative insolvency resolution process for corporate persons classified as micro, small and medium enterprises under the Insolvency and Bankruptcy Code, 2016, ensuring 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.
A new CHAPTER III-A has been introduced, adding Sections 54A to 54P to the Insolvency and Bankruptcy Code, 2016.
The pre-packaged insolvency resolution process shall be completed within a period of one hundred and twenty days from the pre-packaged insolvency commencement date.