Following the recommendations of the sub-committee of the Insolvency Law Committee (ILC)7, the government has promulgated the Insolvency and Bankruptcy Code (Amendment) Ordinance, 2021 with effect from 4 April, 2021 to provide for pre-packaged insolvency resolution process (IRP) for corporate persons classified as micro, small and medium enterprises due to the unique nature of their businesses and simpler corporate structures. This is expected to ensure quicker, cost-effective and value maximising outcomes for all stakeholders.
The Amendment Ordinance introduces the following important amendments to the I&B Code, 2016:
Upon admission of the application to initiate pre-packaged IRP i.e. the commencement date of the pre-packaged IRP, the AA will declare a moratorium, appoint an RP and cause a public announcement of the initiation of the process. The moratorium will apply till the conclusion of the pre-packaged IRP period.
The Corporate Debtor will prepare a base resolution plan and submit it to the RP within two days of the IRP commencement date, post which the RP will present it to the CoC for acception/rejection. The CoC may either accept, reject or seek modifications in the base resolution plan or ask for other resolution plans from prospective resolution applicants. The CoC may select any resolution plan which is better than the base resolution plan. The resolution plan will be approved by a vote of not less than sixty-six per cent. of the voting shares after taking into consideration its feasibility and viability, manner of distribution taking into account the order of priority amongst creditors as laid down in sub-section (1) of section 53, including the priority and value of the security interest of a secured creditor and such other requirements as may be specified. The resolution plan is required to be approved by the CoC within thirty days from its receipt.
However, the CoC may resolve to initiate a corporate insolvency resolution process, if the corporate debtor meets the eligibility requirements, any time after the commencement date of the pre-packaged IRP, but before the approval of a resolution plan.
To refer to the Insolvency and Bankruptcy Code (Amendment) Ordinance, 2021 dated 4 April, 2021 click here.
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