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Ordinance for pre-packaged insolvency resolution of MSMEs under IBC

The government has introduced an ordinance for a pre-packaged insolvency resolution process for pandemic-hit micro, small and medium enterprises (MSMEs). The informal, hybrid and debtor-driven pre-insolvency process, called ‘pre-pack’, will operate under the Insolvency and Bankruptcy Code and is used in overseas jurisdictions like UK, US & Singapore. some of the key features of the new pre-pack framework specified in the Ordinance are listed below.
Approval required by not less than 66 % of the financial creditors
Pre-packaged insolvency resolution process to be completed within 120 days
Management of the firm to continue to vest in the board of directors, subject to conditions
Govt may specify default thresholds ( not more than Rs 1 crore) for pre-pack eligibility ( IBC has a threshold of Rs 1 crore and above)

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