IBC ordinance allows prepack for MSMEs, eases resolution with minimum pain

Ordinance is designed to ensure quicker, cost-effective and value maximising outcomes for all stakeholders in a manner that least disrupts their businesses and preserves jobs too

The government has amended the Insolvency and Bankruptcy Code (IBC) through an Ordinance, enabling prepackaged resolution schemes for micro, small, and medium enterprises (MSMEs) and allowing corporate debtors to propose a resolution plan for the stressed company. 

“The minimum threshold of default will be announced as part of the regulation. The prepackaged scheme has given a semi-formal structure to the pre-insolvency stage. We have put in enough checks to make sure the process is not abused,” a senior government official told Business Standard. 

The Ordinance, approved by President Ram Nath Kovind on April 4, keeping in mind the financial stress