MCA proposes pre-packaged insolvency resolution process for Covid defaults

The future phases would cover a default above Rs 1 crore, followed by Rs 1 to Rs 1 lakh

The Ministry of Corporate Affairs has proposed a framework for ‘prepackaged’ insolvency resolution process that may be implemented in phases to give priority to Covid-related defaults for which the corporate insolvency resolution mechanism is not available and defaults that are anywhere between Rs 1 lakh and Rs 1 crore. 

A draft proposal by the sub-committee of the insolvency law committee has recommended that the corporate debtor (CD) may initiate the prepack since it may prove difficult to implement if creditors are allowed to do so without the willingness of the promoter. 

Unlike the corporate insolvency resolution process (CIRP), where the resolution professional