Govt explores pre-packaged bankruptcy plan to fast track insolvency process

The pre-packaged bankruptcy proposal aims to cut cost and time of resolution process

The feasibility of implementing a ‘pre-packaged’ bankruptcy scheme, prevalent in the US, is under consideration, it is learnt. The move is meant to strengthen the insolvency framework, while cutting the cost and time of the resolution process, according to officials in the Ministry of Corporate Affairs.

Under the pre-packaged scheme, a company in financial distress will be able to chalk out a resolution plan prior to moving the National Company Law Tribunal (NCLT). 

“The scheme will typically allow a stressed company to prepare a financial reorganisation plan with the approval of at least two-thirds of the creditors before filing of an insolvency