Govt. notifies new chapter in IBC for entities eligible to take benefit of pre-packaged insolvency resolution process
The Central government on Sunday notified the Insolvency and Bankruptcy Code (Amendment) Ordinance, 2021. The Ordinance introduces a pre-packaged insolvency resolution process for corporate persons classified as MSMEs under the Micro, Small and Medium Enterprises Development Act, 2006.
Ministry makes an addition of new Chapter – IIIA introducing Sections 54A to 54P to the IBC, 2016, which deals with entities which are eligible to take the benefit of pre-packaged insolvency resolution process, its initiation, duties of resolution professional, approval of a plan.
The Ordinance aims at providing an efficient alternative insolvency resolution process for corporate persons classified as MSMEs by ensuring quicker, cost-effective and value maximizing outcomes for all the stakeholders, in a manner which is least disruptive to the continuity of their businesses, and which preserves jobs.
Sec 11A is inserted to say that where an application filed u/s 54C is pending, the Adjudicating Authority shall pass an order to admit or reject such application, before considering any application filed u/s 7 or section 9 or section 10 during the pendency of such application u/s 54C, in respect of the same corporate debtor.
Further, where an application u/s 54C is filed within fourteen days of filing of any application u/s 7 or section 9 or section 10, which is pending, in respect of the same corporate debtor, then, notwithstanding anything contained in sections 7, 9 and 10, the Adjudicating Authority shall first dispose of the application u/s 54C.
Section 54A is added to state that without prejudice to subsection (1), an application for initiating pre-packaged insolvency resolution process may be made in respect of a corporate debtor, who commits a default referred to in section 4, subject to certain conditions.
The Ordinance further states that the corporate debtor shall obtain an approval from its financial creditors, not being its related parties, representing not less than 66% n value of the financial debt due to such creditors, for the filing of an application for initiating pre-packaged insolvency resolution process.