Insolvency and Bankruptcy Code (Amendment) Ordinance, 2021
Shri Ram Nath Kovind - The President of India recently promulgated the Insolvency and Bankruptcy Code Amendment Ordinance, 2021. This amendment will allow a pre-packaged insolvency process for Ministry of Micro, Small & Medium Enterprises (MSMEs). This pre-packaged insolvency resolution process is called PIRP.
About the ordinance
The ordinance introduces a pre-packaged insolvency resolution process for corporate individuals classified as MSMEs under the MSME Development Act, 2006. Chapter III-A has been presented in the Insolvency and Bankruptcy Code, 2016 under this amendment.
What is the primary purpose of the ordinance?
The purpose of this ordinance is to provide an efficient alternative insolvency resolution process for corporate individuals classified as MSMEs.
How will corporates benefit from the ordinance?
This ordinance allows the corporate debtor to present a "base resolution plan" to the resolution professional. However, the debtor must have a plan prepared before contacting creditors to initiate PIRP. If the creditors' committee has not approved the project, the resolution professional will invite applicants to submit various programs.
- The new framework applies to MSMEs with a highest default value of Rs 1 crore.
- A PIRP cannot run parallel to CIRP or Corporate Insolvency Resolution Process.
- PIRP should have a cooling period of three years from the closure of PIRP or CIRP.
Company control during PIRP
Under the PIRP framework, the management of corporate debtor's affairs will continue with the Board of Directors.
What is the difference between PIRP and the IBC process?
- PIRP only applies to MSMEs. On the other hand, IBC applies to all corporate debtors.
- The default limit of PIRP is Rs 1 crore. The IBC limit is more than Rs 1 crore.
- PIRP provides a time of 90 days to submit a proposed plan. On the other hand, IBC offers 180 days.
No comments