Changes to Insolvency Law Approved by Rajya Sabha

A bill to amend the Insolvency and Bankruptcy Code paving the way for prepackaged insolvency resolution for small and medium enterprises received Parliament’s nod on Tuesday.

Rajya Sabha gave its nod to the bill, cleared by Lok Sabha on July 28, which will replace the ordinance promulgated in April this year.

“Prepack is cost effective and time barred and therefore very suitable for MSME,” finance minister Nirmala Sitharaman said responding to the discussion on the bill in the upper house, which was passed by voice vote in din amid protests from opposition members over snooping issue and farm laws.

Sitharaman said that this a bill coming while keeping situation in mind that MSMEs require a lot of help post the pandemic.

“This will help them… we have increased the threshold, and come up with a pre pack solution,” she said adding that there is an inadequacy of existing options and by this there will a better way in which MSMEs can seek to have a solution.

Explaining the rationale behind the bill, she said there was a feeling that there would be a rise in insolvency after suspension under the code was lifted in March.

“It is less costly, it’s hybrid in nature. The debtor will be still in control and the creditors will be working together. It will actually cut the cost and speed up the process because the whole thing will be over in 120 days” she said. The proposed amendments will enable the government to notify the threshold of a default not exceeding Rs 1 crores for initiation of the pre-packaged resolution process. S-ET

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