Are you not able to pay your instalments on account of COVID pandemic?
Are you MSME? Is your default Amount more than 10 Lakhs?
Quicker, cost-effective and value maximizing outcomes for all the stakeholders stressed MSMEs.
MSME sector has been significantly impacted by the COVID19 pandemic that had caused economic disruptions. IBBI notified the regulations for the “Pre-packaged insolvency resolution process”, which has been introduced for stressed MSMEs by way of an ordinance on 4th April 2021.
The pre-packaged insolvency resolution process aims to provide an efficient alternative insolvency resolution framework for corporate persons classified as MSMEs for ensuring quicker, cost-effective and value maximizing outcomes for all the stakeholders, in a manner that is least disruptive to the continuity of MSMEs businesses and which preserves jobs.
Pre-packaged insolvency resolution process, offer opportunity to reorganize not only financial debts but also workmen dues, operation creditor, Govt due as well all any other class of creditors. By availing this process MSMEs will be able to timebound, quicker, cost-effective mechanism which will also ensure continuity of MSMEs businesses and job creation.
Key Takeaways
1. Who can initiate? - Stressed MSME himself who is eligible can initiate process with FC approval
2. Moratorium period will begin from insolvency commencement date till end of process which will prohibit the institution of suits or continuation of pending suits or proceedings against the corporate debtor or enforce any security interest
3. Management of the affairs of the corporate debtor shall continue to vest in the Board of Directors or the partners unless voted against by COC
4. Base Resolution Plan - Corporate debtor himself shall submit the base resolution plan to the resolution professional within two days
5. Contents of resolution plan - provides Payment for following:
a. Insolvency resolution process costs
b. debts of financial creditors
c. debts of operational creditors
d. debts of Govt & other statutory authorities
e. Debts of workmen & Other creditors
6. Resolution professional shall invite prospective resolution applicants to submit a resolution plan or plans, to compete with the base resolution plan where -
(a) the committee of creditors does not approve the base resolution plan or
(b) the base resolution plan impairs any claims to the operational creditors,
7. If the Adjudicating Authority (NCLT) approve the resolution plan which shall be binding on the corporate debtor and its employees, members, creditors, [including the Central Government, any State Government or any local authority], guarantors and other stakeholders involved in the resolution plan. If not approved PPIR Process shall stand terminated.
To Conclude Pre-packaged insolvency resolution process, offer opportunity to reorganize not only financial debts but also workmen dues, operation creditor, Govt due as well all any other class of creditors. By availing this process MSMEs will be able to timebound, quicker, cost-effective mechanism which will also ensure continuity of MSMEs businesses and job creation.
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