Centre promulgates Insolvency and Bankruptcy Code (Amendment) Ordinance, 2021 on pre-packaged insolvency resolution process for MSMEs

The Central government on Sunday notified the Insolvency and Bankruptcy Code (Amendment) Ordinance, 2021. .The Ordinance introduces a pre-packaged insolvency resolution process for corporate persons classified as micro, small and medium enterprises (MSMEs) under the Micro, Small and Medium Enterprises Development Act, 2006..A new CHAPTER III-A has been introduced, adding Sections 54A to 54P to the Insolvency and Bankruptcy Code, 2016. .The chapter deals with entities which are eligible to take the benefit of pre-packaged insolvency resolution process, its initiation, duties of resolution professional, approval of a plan etc. .The Ordinance is aimed at providing an efficient alternative insolvency resolution process for corporate persons classified as MSMEs by 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..It allows the corporate debtor to submit a "base resolution plan" to the resolution professional who further presents it to the committee of creditors. .The committee of creditors may subsequently approve the base resolution plan for submission to the adjudicating authority if it does not impair any claims owed by the corporate debtor to the operational creditors..Where the committee of creditors does not approve the base resolution plan, the resolution professional shall invite prospective resolution applicants to submit a resolution plan or plans, to compete with the base resolution plan..When the adjudicating authority does not approve the resolution plan, it may inter alia terminate the pre-packaged insolvency resolution process and pass a liquidation order..The pre-packaged insolvency resolution process has to be completed within a period of one hundred and twenty days from the pre-packaged insolvency commencement date..[Read Ordinance]