PremiumNew Delhi: Prospective bidders eyeing bankrupt micro, small and medium enterprises (MSMEs) need to make ‘significantly better’ offers than the turnaround plans submitted by the owners to win these assets, as per new regulations brought out by the Insolvency and Bankruptcy Board of India (IBBI).
The pre-packaged insolvency resolution process regulations, issued by the IBBI on Friday, sets the modalities for creditors of sick MSMEs to invite competing bids from investors and evaluate them against the offer made by the shareholders of these entities for choosing the best revival plan for the company.
IBBI said in the new regulations that if the fresh offer is ‘significantly better’ than the one presented by the owners at the time of initiating bankruptcy resolution proceedings, it may be considered for approval, else they could make do with the other. In other circumstances, when the new bid is not significantly better than the one given by the promoters of the company, creditors could invite the new bidder and the promoter to improve upon their offers till either of them fails to raise the bid within the given time. For this bid process, 48 hours are allowed, says the regulations, which is effective from Friday.
Mint reported on 9 April that owners of MSMEs going into bankruptcy proceedings under the pre-pack scheme could lose their business in certain cases if they do not match a better offer from a potential investor.
The Insolvency and Bankruptcy Board of India (Prepackaged Insolvency Resolution Process) Regulations, 2021 also prescribes the way various tasks are to be carried out as part of the pre-packaged resolution plan and specifies eligibility of the resolution professional and the valuers to be appointed. It also covers the way claims of creditors are to be admitted, how meetings of creditors are to be held and when the resolution process is to be terminated.
The government brought out the pre-packaged resolution scheme earlier in the week by an ordinance as a simplified alternative to the bankruptcy code for small businesses that will help them restructure the business without a disruption during the process. Unlike the general bankruptcy resolution provisions, pre-packs do not require the administrator appointed by creditors to take over the control of the company although the management’s actions will be closely monitored.
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