The bankruptcy resolution process, which came into effect in April 2021 to support small businesses affected by Covid-19, was pretty much a starter. As I recently explained in this newspaper article, there are 13 pre-packing applications so far, five plans have been approved, one withdrawal, seven cases are still in progress. This is a surprise given the outstanding advantages of the on-paper scheme.
Unlike corporate bankruptcy, once the resolution plan is approved by the IBC, the resolution plan is well formed and creditors take over concerns from the promoter – the “Pre-Pack” resolution plan is MSME as the term suggests It is suggested that it is rusted and secured by the debtor. Creditor before bankruptcy proceedings began. They apply to defaults of less than 1 crawl. The National Company Tribunal approves the plan and then a resolution expert oversees the implementation. Importantly, promoters continue to control concerns. Processes that appear to be bothersome and expensive for MSME should elicit a better response. The center should ask why Taker was not there.
Lack of recognition of the MSME universe – According to budget, there is an MSME of 5.93 crore, of which over 95% are micro companies with turnover rates below 5 crores (currently revised up to 10 crores) – as a major factor It is quoted. The second is likely to resist going for the debtor’s advance. While it deserves to drive potential benefits (better value realization, timeliness, and revival outlook), an October 2020 report prepared for the Ministry of Corporate Affairs predicts two issues. It’s there. Surveillance of corporate bankruptcy. It is beneficial to look into the experiences of other countries carrying out prepacked bankruptcies, such as the US, UK, Canada, France, and Singapore.
If the interface between the debtor and creditor is improved, you may be exploring a prepack of larger units. Currently, there are some concerns about how promoters have regained the company at lock bottom prices in many IBC cases. Prepacks should not be extended within scope unless IBC is robust in terms of value realization and revival. Bankruptcy resolution is managed by two systems: debtor ownership (collections and reserve bank guidelines under the Corporate Act) and creditors and controls (IBC). In times of economic shock, debtors may not be liable for bankruptcy. But if debtors create a maze of businesses where they siphon up their funds or run shows poorly, there is no case of pre-packs. Creditors should develop skills to sniff out the troubles and collect assets in time. In such cases, it is only too common and pursuing a solution plan can be a waste of time and money.
