The government has amended the insolvency law to provide for a pre-packaged resolution process for micro, small and medium enterprises to ensure a quicker, cost-effective and value maximising outcome for all stakeholders.

The solution will be least disruptive to the continuity of their businesses and would preserve jobs.

An ordinance was promulgated to amend the Insolvency and Bankruptcy Code (IBC) on April 4. The latest move comes less than two weeks after the suspension of certain IBC provisions ended. The suspension — wherein fresh insolvency proceedings were not allowed for a year — had started on March 25, 2020.

Under the ordinance, it is considered necessary to urgently address the specific requirements of the micro, small and medium enterprises (MSMEs) relating to the resolution of their insolvency because of the unique nature of their businesses and simpler corporate structures.

“Taking a cue from other countries where similar provisions have been proved to be beneficial, this process may act as an efficient alternative insolvency resolution process for genuine MSMEs,” said Rashi Suri, managing partner — Upscale Legal

Soumitra Majumdar, partner at J Sagar Associates, said: “While modelled on debtor-in-possession approach, it vests significant consent rights to the financial creditors such that the mechanism cannot be misused by errant promoters.”