IBBI notifies regulations for pre-packaged insolvency resolution process

IBBI on Friday notified the regulations for the pre-packaged insolvency resolution process, which has been introduced for stressed MSMEs.

By way of an ordinance on April 4, the government amended the Insolvency and Bankruptcy Code (IBC) to introduce the pre-pack resolution process for MSMEs (Micro, Small and Medium Enterprises). MSME sector has been significantly impacted by the coronavirus pandemic that had caused economic disruptions.

With regard to the pre-pack resolution process, the Insolvency and Bankruptcy Board of India (IBBI) on Friday notified the regulations, according to an official release.

The regulations detail the forms that stakeholders are required to use, and the manner of carrying out various tasks by them as part of the pre-pack resolution process.

It also provides details about various aspects, including eligibility criteria to act as resolution professional, identification and selection of authorised representative, competition between the base resolution plan and the best resolution plan.

On Wednesday, the corporate affairs ministry said the IBC amendments aim to provide an efficient alternative insolvency resolution framework for corporate persons classified as MSMEs for ensuring quicker, cost-effective and value maximising outcomes for all the stakeholders, in a manner that is least disruptive to the continuity of MSMEs businesses and which preserves jobs.

It is expected that the incorporation of the pre-packaged insolvency resolution process for MSMEs will alleviate the distress faced by them due to the impact of the pandemic, the ministry had said in a release.

"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," as per the release.