The Insolvency and Bankruptcy Code (Amendment) Bill, 2021 was passed by the Lok Sabha on July 28 and by the Rajya Sabha on 3rd August. Main features of the Bill👇

Pre-pack for MSMEs which blends elements & virtues of both formal and informal insolvency proceedings

Under the pre-pack process, a resolution plan is negotiated between the debtors & creditors before formal proceedings start. This combines efficiency, speed cost effectiveness & flexibility with the binding effect of a formal process.

Minimum threshold default of Rs.10 lakh for initiation of pre-pack insolvency resolution process

Initiation with the consent of 66% of unrelated financial creditors & special majority of shareholders

120 days for the entire process

It enables:

  • An efficient alternative insolvency resolution framework for MSMEs
  • A process that offers flexibility
  • Quicker, cost-effective, and value-maximising outcomes for all stakeholders

Measures taken by the government for MSMEs

Since the onset of the pandemic, the government has increased the minimum default amount for CIRP to Rs 1 crore and also suspended the filing of CIRP for defaults arising between 25 March 2020 and 24 March 2021. It subsequently revised the definition of MSMEs to include 99 per cent of all businesses. The government had also announced the Emergency Credit Line Guarantee Scheme (ECLGS) to provide emergency credit to pandemic hit sectors as a part of the Atmanirbhar Bharat Scheme.