The Insolvency and Bankruptcy Code (Amendment) Ordinance 2021 has been promulgated by the Central Government to allow pre-packaged insolvency resolution process for corporate debtors classified as micro, small or medium enterprises under the Micro, Small and medium enterprises (“MSME”) under the Micro, Small and Medium Enterprises Development Act, 2006 having default amounting to minimum Rs. 10 Lakhs and not more than Rs. 1 Crore.

It is mentioned in the ordinance that MSMEs are critical for Indians Economy as they are contributing significantly to its gross domestic product and provide employment to a sizeable population and considering the urgency to provide an efficient alternative insolvency resolution process for the MSME, it is considered expedient to introduce a pre-packaged insolvency resolution process for the MSMEs.

  • MSME as per the Micro, Small and Medium Enterprises Development Act, 2006: –

Composite Criteria: Investment in Plant & Machinery/equipment and Annual Turnover

ClassificationMicroMediumSmall
Manufacturing Enterprises and Enterprises rendering ServicesInvestment in Plant and Machinery or Equipment:
Not more than Rs.1 crore and Annual Turnover; not more than Rs. 5 crore
Investment in Plant and Machinery or Equipment:
Not more than Rs.10 crore and Annual Turnover; not more than Rs. 50 crore
Investment in Plant and Machinery or Equipment:
Not more than Rs.50 crore and Annual Turnover; not more than Rs. 250 crore

What is pre-packaged insolvency resolution process (Pre-pack): –

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