August 12, 2021
Summary of the notification issued by the Central Government on 11/08/2021
Pre-Packaged Insolvency Resolution Process(IRP) for distressed Micro, Small and Medium Enterprises (MSMEs) under IBC, 2016 w.e.f 04/04/2021
The ordinance issued on 04/04/2021 w.r.t Pre-Packaged Insolvency Resolution Process(IRP) for distressed Micro, Small and Medium Enterprises (MSMEs) under IBC, 2016 has been passed as an Act. The gist of the ordinance is reproduced here for easy reference.
With the objective to ensure quicker, cost-effective and value maximising outcomes for all the stakeholders, in a manner which is least disruptive to the continuity of MSME businesses and preservation of the jobs, the Government has introduced through an ordinance, a pre-packaged insolvency resolution process for corporate persons classified as MSMEs.Key highlights of the Insolvency and Bankruptcy Code (Amendment) Ordinance, 2021 are as follows:1. Central Government shall notify the minimum amount for initiation of Pre-Packaged IRP, which shall not exceed one crore rupees.2. A new chapter “CHAPTER III-A PRE-PACKAGED INSOLVENCY RESOLUTION PROCESS” has been introduced, which details out-a. Eligibility criteria for initiation of Pre-Packaged IRP against a Corporate Debtor classified as MSME.b. Duties of resolution professional before initiation of pre-packaged IRP and after the initiation of the proceedingsc. Time-limit for completion of pre-packaged IRP, shall be completed within a period of 120 days from the pre-packaged insolvency commencement date and the creditor- approved resolution plan shall be submitted to the Adjudication Authority (AA) within 90 days from such commencement date.d. Procedure for Declaration of moratorium and public announcement during the pre-packaged IRPe. Conditions subject to which the Board of Directors or the partners, as the case may be, of the corporate debtor, shall manage the affairs of the Corporate Debtor as a going concern, exercise and discharge their contractual duties and statutory rights etc.f. Time limit for Constitution of Committee of Creditors and their rights including the passing of resolution to vest the management of the corporate debtor with the resolution professional, initiation of Corporate Insolvency Resolution Process by voting for termination of pre-packaged IRP etc.g. Procedure for consideration and approval of resolution planh. Penal provisions to be levied by the AA on the officer of the corporate debtor, on an application by the resolution professional on and after the pre-packaged insolvency commencement date, that he/she manages its affairs with the intent to defraud creditors of the corporate debtor or for any fraudulent purpose.