Union Finance Minister Nirmala Sitharaman on August 4 outlined some features of the Insolvency and Bankruptcy Code (Amendment) Bill, 2021.
Sitharaman said the passage of the bill in Parliament enables "an efficient alternative insolvency resolution framework for MSMEs."
Rajya Sabha had on August 3 passed the bill, which provides for a pre-packaged insolvency resolution mechanism for micro, small and medium enterprises (MSMEs). Lok Sabha had passed it on July 28.
The bill replaces the Insolvency and Bankruptcy Code (Amendment) Ordinance, 2021, which was promulgated on April 4. It amends the Insolvency and Bankruptcy Code, 2016.
The bill enables a quicker insolvency resolution process for smaller business .
Here are the some of the features of the Insolvency and Bankruptcy Code (Amendment) Bill, 2021, tweeted by Sitharaman:
> Pre-pack for MSMEs which blends elements and virtues of both formal and informal insolvency proceedings
> Under the pre-pack process, a resolution plan is negotiated between the debtor & creditors before formal proceedings start. This combines efficiency, speed, cost effectiveness & flexibility with the binding effect of a formal process.
> Minimum threshold default of Rs 10 lakh for initiation of pre-pack insolvency resolution process
> Initiation with the consent of 66 percent of unrelated financial creditors & special majority of shareholders
> 120 days for the entire process
> Guidance and oversight of the resolution professional
> Finality of the process, with judicial approval