Finance Minister Nirmala Sitharaman on Wednesday educated about the remarkable highlights of the Insolvency and Bankruptcy Code (Amendment) Bill, 2021 and added that Rajya Sabha has passed the bill on Tuesday, August 3, 2021.
"The Insolvency and Bankruptcy Code (Amendment) Bill, 2021 was passed by the Lok Sabha on July 28 and by the Rajya Sabha yesterday.
Salient features of the Bill include:
- Pre-pack for MSMEs which blends elements & virtues of both formal and informal insolvency proceedings," the Office of Nirmala Sitharaman tweeted.
- The bill will take the place of the Insolvency and Bankruptcy Code (Amendment) Ordinance, 2021, which was signed into law on April 4. It updates the 2016 Insolvency and Bankruptcy Code.
- The bill allows for a more expedited bankruptcy objective for small businesses.
- Pre-packaged solution for MSMEs that combines the best features of both formal and informal indebtedness procedures.
- A goal plan is negotiated between the indebted person and lenders before formal procedures begin under the pre-pack measure. This combines proficiency, speed, cost viability, and flexibility with the cycle's limiting effect.
- Commencement with 66 percent of little monetary banks and an amazing majority of investors on board.
- The entire cycle takes 120 days.
- The goal's direction and oversight are excellent.
Things to Know
This plan can be initiated by an MSME that has not completed its payment obligation of ten lakh rupees and has received approval from lenders who have advanced 66 percent of the debt amount.
In the current CIRP model, creditors take an insolvent borrower to bankruptcy court for a time-limited resolution, and the procedure permits other businesses to bid for the stressed entity.
It will be a relief for the NCLT, which is now dealing with a number of matters that could take many months to resolve. The tribunal will just have to approve or reject an MSMEs resolution plan.
The promoters can remain in command of their company until a resolution is achieved, allowing for uninterrupted commercial operations. A company's assets will not be eroded due to the shorter period available for resolution.
MSMEs can restructure their liabilities and start over without going through a time-consuming and expensive insolvency process.
There would be a punishment for initiating the pre-packaged bankruptcy resolution procedure fraudulently or maliciously, or with the goal to defraud others, as well as for fraudulent administration of the corporate debtor during the process.
In addition, offenses involving the pre-packaged insolvency resolution procedure would be punished.