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.
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