The Ministry of Corporate Affairs (MCA) set the minimum default threshold at Rs.10 lakh for Micro, Small, and Medium Enterprises (MSME) pre-pack insolvency resolution.
Explaining the benefits of the pre-packaged resolution process through a series of tweets, the Finance Ministry said that the central government has decided minimum threshold default of Rs 10 lakh for initiation of resolution process by MSME corporate debtor.
“Pre-pack for MSMEs is a hybrid corporate rescue process, which blends elements and virtues of both formal and informal insolvency proceedings. A resolution plan is negotiated between the debtor and its creditors before the commencement of formal proceedings,” the ministry said.
The amendment for pre-packaged resolution for MSMEs will have multiple benefits for the sector, it said, adding that it is a time and cost-effective insolvency resolution that will cause minimum business disruption, maximize value, preserve employment and lessen the burden on the National Company Law Tribunal (NCLT).
The initiative is based on a trust model and the amendments honour the honest MSME owners by trying to ensure that the resolution happens and the company remains with them, the Ministry added.
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