Insolvency law amendments to provide efficient resolution framework for MSMEs: Govt

The corporate affairs ministry has said that the latest amendments to the insolvency law by way of an ordinance are aimed at providing an efficient alternative resolution framework for corporate persons classified as Micro, Small and Medium Enterprises (MSMEs) under the Code, for ensuring quicker, cost-effective and value maximising outcomes for all the stakeholders, in a manner which is least disruptive to the continuity of MSMEs businesses and which preserves jobs.

It said pre-packaged insolvency resolution process has been introduced for stressed MSMEs. The initiative is based on a trust model and the amendments honour the honest MSME owners by trying to ensure that the resolution happens and the company remains with them. The ordinance to amend the Insolvency and Bankruptcy Code (IBC) was promulgated on April 4. The Union Cabinet approved a proposal to amend the IBC on March 31.

According to the ministry, it is expected that the incorporation of pre-packaged insolvency resolution process for MSMEs will alleviate the distress faced by them due to the impact of the pandemic Other expected benefits from the amendments include lesser burden on adjudicating authority, assured continuity of business operations for corporate debtor, less process costs and maximum assets realisation for financial creditors.