As per a top government official, 6 of the 10 active Indian companies will be eligible for the new pre-packaged bankruptcy scheme that allows quicker debt resolution. This is because out of the 1.3 million companies in the country only 60% qualify as MSMEs which are incorporated.
Ministry of Corporate Affairs' Rajesh Verma said much of the ground work needs to be done as and when the case is taken for a pre-pack bankruptcy by the tribunal. In a tweet the finance ministry for admitting the company into resolution process, the minimum payment default threshold has been decided at Rs. 10,00,000. So, now the incorporated MSMEs who missed a debt obligation of Rs. 10 lakh could on their own go for pre-pack bankruptcy solution or lenders that account for 66% of the firm can initiate the bankruptcy resolution. The scheme does not includes proprietorship concerns though.
Now as per the pre-pack bankruptcy scheme announced on Monday the major advantage shall be that much of the word shall be accomplished in an informal way that includes preparation of a turnaround plan for the business.
This is an addition to the country's s 4-year old IBC and is an alternative way to turnaround small businesses. And as alongside the working of the scheme, the business operation shall not be disrupted as MSMEs include special characteristics together with informal business relationships.