PRE-PACKAGED INSOLVENCY RESOLUTION PROCESS FOR MSMEs
On 4 April 2021, the Union Government has moved the Insolvency and Bankruptcy Code (Amendment) Ordinance, 2021 (“Ordinance”). The Ordinance introduces a new chapter, Chapter III-A in the Insolvency and Bankruptcy Code, 2016 (“Code”) with special provisions introducing pre-packaged insolvency resolution process (“PIRP”) for both, companies and partnerships that are registered as micro, small and medium enterprises (“MSMEs”) under the Micro, Small and Medium Enterprises Development Act, 2006. This step has been taken to mitigate the financial stress caused by the Covid-19 pandemic. With the lifting of the one-year ban on insolvency cases against Covid-19 defaults, a surge in bad loan cases is expected. The timing of the Ordinance is well-suited to address early identification of stress, cost-effective and quicker resolution in a manner that maximizes outcomes for all stakeholders and is least disruptive to the continuity of business.